Notes Payable definitions Flashcards
Notes Payable definitions
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Notes Payable Formal written obligations to repay borrowed funds with interest by a specified maturity date, recorded as liabilities on the balance sheet. Principal Original amount of money borrowed under a note, excluding any interest, and used as the basis for interest calculations. Maturity Date Specific date stated in a contract when the borrowed principal and any remaining interest must be repaid in full. Interest Rate Annual percentage charged on the principal, determining the cost of borrowing and the amount of interest accrued. Time Factor Proportion of a year used in interest calculations, reflecting the period the note has been outstanding. Interest Expense Cost recognized for using borrowed funds over time, reducing net income and equity on financial statements. Interest Payable Liability account representing interest that has accrued but not yet been paid as of the financial statement date. Short-Term Note Obligation with a maturity of one year or less, typically requiring a single payment of principal and interest at maturity. Long-Term Note Obligation with a maturity exceeding one year, often involving periodic interest payments before principal repayment. Adjusting Entry Accounting record made at period end to recognize accrued interest expense and update related liabilities before payment. Accounts Payable Liability for goods or services received on credit, usually not involving formal contracts or interest charges. Face Value Stated amount on the note representing the principal to be repaid at maturity, used in interest calculations. Journal Entry Formal accounting record documenting transactions such as borrowing, accruing interest, and repaying notes. Liability Obligation arising from past transactions, requiring future payment of assets or services, such as notes payable or interest payable. Equity Residual interest in assets after deducting liabilities, affected by expenses like interest expense recognized on notes.
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