The official business definition of Notes Payable is a debt owed by a company to a lender or creditor. It is an obligation that is documented by a promissory note, which is a written promise to pay a certain amount of money at a specified time. Notes Payable is typically a short-term debt, and is usually due within one year. In accounting terms, Notes Payable is a liability account and is recorded on the balance sheet as a debit. This means that when a company issues a note payable, it increases its liabilities and decreases its cash. The opposite is true when the company pays off the note. The company decreases its liabilities and increases its cash. It is important to note that interest payments on notes payable are also recorded as a debit.
