Sunday, June 24, 2018

Notes Payable

Notes payable are loans due to banks or other creditors.  A “note” is a legal contract; it represents an obligation to repay a debt.  A note payable may be either current or non-current or a combination of both.  “Notes Payable” are often individually listed on the balance sheet, and the amounts represent outstanding principal balances only.

Most notes payable consist of long-term loans (or mortgages) that are repaid in installments.  These notes are listed as non-current liabilities on the balance sheet.  However, the sum of principal payments due in the upcoming year are subtracted and listed separately as current liabilities called, “Current Portion of Long-Term Debt” or “Current Maturities of Long-Term Debt”

If a note payable, such as a revolving line of credit or a loan coming due, expires or balloons within the year, then the entire balance is listed as a current liability.

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