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Promissory Note:

"A promissory note is instrument in writing (not being a bank note and a currency note) containing an unconditional undertaking signed by the maker to pay a certain sum of money only to or the the order of a certain person or to the bearer of the instrument."

The definition means that when a person gives a promise in writing to pay a certain sum of money unconditionally to another person of according to creditor's instructions, this document is called a promissory note. It is generally used for loan purposes.

Specimen/Format of Promissory Note:

The accounting treatment for promissory notes is almost the same as that of bills of exchange.

Characteristics of a Promissory Note:

  1. It should be in writing.

  2. It is a promise by a debtor to pay.

  3. The promise is always for payment of money.

  4. It is always unconditional.

  5. Acceptance is not essential.

  6. It can be endorsed.

Relevant Articles:

» Definition and Explanation of Bill of Exchange
» Types and Classification of Bill of Exchange
» Accounting Treatment of Bill of Exchange
» Discounting of a Bill of Exchange
» Endorsement of Bill of Exchange
» Bill of Exchange Sent to Bank for Collection
» Dishonor of Bill of Exchange
» Renewal of Bill of Exchange
» Insolvency of One Party
» Retiring a Bill of Exchange Under Rebate
» Accommodation Bills of Exchange
» Bills Receivable and Bills Payable Books
» Promissory Note

 

 

A D V E R T I S E M E N T

 

Financial Accounting Topics


  Introduction to Accounting
 ----------------------------------------------------------------------------
  Transactions and Accounting Equation
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  Analysis of Business Transactions
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  Journal, Ledger and Trial Balance
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  Accounting for Bills of Exchange
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  Special Journals
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  Cash Book
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Bank Reconciliation Statement
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  Final Accounts
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  Work Sheet
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  Capital and Revenue Items
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  Valuation of Inventories
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  Accounts of Non-profit Making Organizations
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  Statement of Cash Flows
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  Accounting Ratios Analysis
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  Depreciation, Provisions and Reserves
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  Accounting Dictionary
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  Financial Calculators
 
 
 
Managerial Accounting Topics

  Financial Statements
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  Cost Volume Profit Relationship
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  Variable Costing System
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  Materials and Inventory Cost Control
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  Activity Based Costing System
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  Standard Costing and Variance Analysis
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  Balanced Scorecard
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  Capital Investment Analysis/Capital Budgeting
 

 

 

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