Final answer:
An account receivable refers to the money owed to a business by its customers, while a note receivable is a written promise to repay a specific amount on a future date.
Step-by-step explanation:
An account receivable refers to the money owed to a business by its customers or clients for goods or services that have already been delivered or provided. It represents the amount of money that the business expects to receive in the future. A note receivable, on the other hand, refers to a written promise by a borrower to repay a specific amount of money, usually with interest, to the lender on a specified future date.
Let's take an example to illustrate the difference between the two. Suppose a company sells product to a customer and allows them to pay within 30 days. The amount owed by the customer will be recorded as an accounts receivable. Now, if the customer issues a promissory note stating that they will pay the amount owed in 60 days, then this will be recorded as a note receivable.
In summary, an accounts receivable is the money owed by customers for goods or services already provided, while a note receivable is a written promise to repay a specified amount on a future date.