What do notes receivable represent for a business?

Notes receivable represent amounts that are owed to a business in the form of formal written promises, typically requiring the borrower to pay back a specified amount at a future date. When looking at the options provided, the correct answer highlights that these notes are recorded at their face value, which is the amount stated on the note. This value reflects the principal that the customer has agreed to pay, and it forms the basis for how these notes are reported on the balance sheet.

Understanding this concept is important as it emphasizes that notes receivable are not merely casual debts but involve a legal documentation of the debt, often with specific terms regarding interest and payment schedules. This distinction sets notes receivable apart from other types of receivables, such as accounts receivable, which may not have formal terms attached.

The other options don’t align with the definition of notes receivable: they describe general accounts receivable or cash flow concepts but do not specifically focus on the formal nature and terms associated with notes receivable.