Notes receivable are transactions in which a borrower promises to pay a lender a specific amount, at a certain time, with interest. These notes are recorded on the balance sheet as an asset. As the lender, you are taking on the role of creditor when you record the note and receive payments from the borrower. From an accounting perspective, notes receivable represent an asset to your company since they provide cash that can be used for business operations. At the same time, however, these notes also create liabilities since the money borrowed is payable to the lender at some point in the future. It’s important to remember that while notes receivable create both assets and liabilities, they always go under the heading of “assets” on the balance sheet.