Very few of these liabilities meet these criteria and, therefore, most contingent liabilities are described in notes to the financial statements rather than recorded in the accounts. Account for notes receivable and payable including calculation of interest. A note is a negotiable instrument and may be transferred, usually by endorsement, and thus becomes payable to another party, who is called a holder in due course . In this case, the maturity value or amount of the note is greater than its face value or principal amount. For more detail, please refer to the Note on Notes and Interest .
Interest is the fee paid or received for the use of money over a period of time.
The rate is usually, but not always, the rate per year, and time is usually expressed as a fraction of a year, often considered 360 days long. The day the note is issued is excluded and the day the note matures is included in calculating the time period for which interest is computed. A note is dishonored if its maker fails to pay it at maturity. Please refer to the Note on Uncollectible Accounts for more details. A loan may be secured from a bank by giving an interest-bearing note.