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:
-
It
should be in writing.
-
It is
a promise by a debtor to pay.
-
The
promise is always for payment of money.
-
It is
always unconditional.
-
Acceptance
is not essential.
-
It can be
endorsed.
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