What is the journal entry to record the receipt of a note from a charge customer in settlement of the account?

The correct entry for recording the receipt of a note from a charge customer in settlement of the account is to debit Notes Receivable and credit Accounts Receivable. This journal entry reflects the fact that the business is now holding a note instead of an open account from the customer.

When a customer settles their account by providing a promissory note, the company transforms the receivable into a formal note that can accrue interest. Debiting Notes Receivable increases this asset account, indicating that the business has a legal claim to receive payment from the customer in the future. Conversely, crediting Accounts Receivable decreases this account, reflecting that the customer no longer has an open balance in their account with the business.

This journal entry is essential for accurate record-keeping, ensuring that both the company's assets and the customer's obligations are appropriately updated. It illustrates the transfer from an account receivable, which is typically unsecured, to a note receivable, which generally has more formal terms and often includes interest.