A company purchases assets — items that bring value to a company — to produce higher revenue than running operations without these items. Accountants record assets by type and classify them in groups for external reporting. Notes receivable is either a short-term or long-term asset. Intangible assets are long-term items that have a specific useful life for the company.
Notes receivable is not an intangible asset in accounting methodology. These notes typically occur when a company issues a promissory note to customers. The note is a physical representation of an agreement to pay a dollar amount to the company. Notes that are due in less than 12 months of issuance are short-term assets. Notes due in over 12 months are long-term assets.
Intangible assets have no physical representation. Accountants cannot see or touch the assets. Patents, copyrights, trademarks and right to use agreements are among the most common intangible assets. Useful lives for these assets can vary. Countries typically set useful lives for the former three asset types. The latter — right to use agreements — vary depending on the agreement a company makes with another business.
Both notes receivable and intangible assets fall on a company’s balance sheet. Notes receivable are either a current asset or long-term asset. The 12-month timeline dictates the classification for the note. A note due in under 12 months is a current asset and over 12 months is a long-term asset. Intangible assets are usually long-term assets. They fall underneath the tangible long-term assets listed on the balance sheet.
Intangible assets typically require amortization calculations. Amortization represents the value used for each intangible asset. Accountants must calculate this expense each month and report it on the income statement. The intangible asset’s historical value then reduces as amortization increases. Notes receivable do not depreciate. Failure to collect the notes, however, can result in bad debts expense as the company must write off the uncollectible notes receivable.
- "Intermediate Accounting"; David Spiceland, et al.; 2007
Kirk Thomason began writing in 2011. In addition to years of corporate accounting experience, he teaches online accounting courses for two universities. Thomason holds a Bachelor and Master of Science in accounting.