Joshua Opada
Accounting Notes Pt 1
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When a company borrows cash from a bank and signs a promissory note, the firm’s
liability is reported as a note payable.
An example would be:
AT ISSUANCE
Borrower:
Cash
Notes Payable
Lender:
Notes receivable (face amount)
Cash
INTEREST DATES
Borrower:
Interest expense
Cash (stated rate * face amount)
Lender:
Cash (stated rate * face amount)
Interest revenue
AT MATURITY
Notes Payable
Cash
Lender:
Cash
Notes Receivable
SECTION 2
Note exchanged for assets or services
Buyer/Issuer
Machinery (cash price)
Discount on notes payable (difference)
Notes payable (face amount)
Seller/Lender
Notes receivable (face amount)
Discount on notes receivable (difference)
Sales revenue (cash price)