Final answer:
A note is a more formal document compared to an account receivable because it includes specific terms and conditions like interest and payment schedule. Notes receivable can be either short-term or long-term assets depending on their maturity date.
Step-by-step explanation:
The correct answer to the student's question is: 3) A note is a more formal document than an account receivable. In accounting, notes receivable represents money owed to a company that is formalized through a promissory note. The formal nature of a note receivable typically includes details like the interest rate, payment schedule, and maturity date, making it more formal than an account receivable, which may not contain such detailed terms.
Regarding the other options:
- A notes receivable can be either a current asset or a long-term asset depending on when it is due. If it's due within one year, it's classified as a current asset. If it's due in more than one year, it's considered a long-term asset.
- An account receivable is a claim from a credit sale that is less formal and typically does not bear interest and does not require a formal agreement in the form of a promissory note.