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Definition

Promissory note

A promissory note is a written promise to pay a specified amount of money on demand or at a definite time. Notes receivable give the payee a stronger legal claim to assets than accounts receivable. Promissory notes may e used: (1) when individuals and companies lend or borrow money, (2) when the amount of the transaction and the credit period exceed normal limits, or (3) in settlement of accounts receivable.

 In a promissory note, the party making the promise to pay is called the maker. The party to whom payment is to be made is called the payee. The note may specifically identify the payee by name or may designate the payee simply as the bearer of the note.

Promissory notes are negotiable instruments (as are checks), which means that they can be transferred to another party by endorsement.


Promissory note is a short-term financing instrument gi8ven by a debtor (called the promise) to a creditor (called the promise) as a legal and binding promise to pay a certain sum of money at a future date, usually with interest at a fixed rate.

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