Notes payable is defined as what?

• A. A written promise of a business to pay a creditor a certain amount in the future
• B. A written promise of a customer to pay a business a sum of money at a future date
• C. A cash receipt for loan
• D. An invoice to be paid later

Answer: (A)

Notes payable is a written promise by a business to repay a creditor a specific amount in the future. This creates a formal liability on the balance sheet and usually specifies a due date and may include interest. It differs from accounts payable, which is an obligation to a supplier for goods or services and isn’t typically a formal note. It also isn’t a cash receipt from a loan or an invoice to be paid later. A practical example is borrowing cash by signing a note payable to a bank for a set amount due at a later date, often with interest.