Notes Payable And Accounts Payable Definition
When a company purchases goods or services on credit, the resulting debt is called a payable. A payable can be in the form of either a note or an account. The main difference between the two types of payables is their terms. Notes payable generally have longer terms than accounts payable, and may even be interest-bearing. Accounts payable, on the other hand, are usually due within a period of 30 days or less.
Both accounts payable and notes payable show up as liabilities on a company’s balance sheet. They are considered short-term liabilities, since they are typically paid off within one year. In some cases, however, payables may be classified as long-term liabilities if they are not expected to be paid off within the next 12 months.
