What is defined as a note resulting from a sale that requires monthly payments of principal and interest?

An installment note is characterized by its requirement for the payment of both principal and interest in regular, usually monthly, installments over the life of the note. This structure allows the borrower to gradually pay down the principal amount borrowed while also covering the interest cost on the outstanding balance.

This is particularly important in accounting and finance, as installment notes help businesses manage cash flow effectively, ensuring that payments are predictable and manageable on a monthly basis. The regular payment schedule also aligns with budgeting practices, allowing for easier financial planning and forecasting.

In contrast, a promissory note generally refers to a commitment to pay a certain amount, but it may not specify the structure of payment. A term loan typically involves a lump sum that is repaid in installment payments as well, but the term "installment note" specifically emphasizes the nature of the payments being both principal and interest. Revolving credit allows for borrowing and repayment on a flexible basis and does not require fixed monthly payments like an installment note.