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As you repay the loan, you will document notes payable as a debit journal entry, while crediting the cash account. This is recorded on the stability sheet as a liability.
But you must additionally work out the activity share after making a payment, recording this discern in the activity expense and pastime payable accounts.
Why is notes payable a debit?
Notes Payable is a legal responsibility (debt) account that typically has a credit balance. When cash is borrowed from the bank, the accountant will debit the Cash account to mirror the enlarge in the amount of cash and credit score the Notes Payable account to show the corresponding debt.
In a balance sheet, notes payable need to appear beneath your contemporary or long-term liabilities, depending on the due dates. Are notes payable an expense?
No, technically notes payable and bills payable are legal responsibility accounts, not expenses.
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