Notes payable represent obligations to banks or other creditors based on formal written agreements. A specific interest rate is usually identified in the agreement. Following the matching principle, if interest is owed but has not been paid, it is accrued prior to the preparation of the financial statements. Assume The Flower Lady signed a $10,000 three-year note with interest of 10% on July 1 in exchange for a piece of equipment. The interest is due and payable quarterly on Oct. 1, Jan. 1, April 1, and July 1. The Flower Lady operates on a calendar-year basis and issues financial statements at the end of each quarter. A long-term note payable must be recorded as of July 1 with interest accrued at the end of each quarter.
http://www.cliffsnotes.com/study_guide/Notes-Payable.topicArticleId-21248,articleId-21179.html
What is the difference between Notes Payable and Accounts Payable?
While both of these are liabilities, Notes Payable involves a written promissory note. For example, if your company wishes to borrow $100,000 from its bank, the bank will require company officers to sign a formal loan agreement before the bank provides the money. (The bank might also require your company to pledge collateral and for the company owners to personally guarantee the loan.) Perhaps the loan paperwork will be a half inch high. Your company will record this loan in its general ledger account, Notes Payable. (The bank will record the loan in its general ledger account Notes Receivable.)
Contrast the bank loan with phoning one of your company’s suppliers and asking for a delivery of products or supplies. On the next day the products arrive and you sign the delivery receipt. A few days later your company receives an invoice from the supplier and it states that the payment for the products is due in 30 days. This transaction did not involve a promissory note. As a result, this transaction is recorded in your company’s general ledger account Accounts Payable. The supplier will record the transaction with a debit to its asset account Accounts Receivable (and a credit to its account Sales).
http://blog.accountingcoach.com/notes-payable-accounts-payable/
http://www.cliffsnotes.com/study_guide/Notes-Payable.topicArticleId-21248,articleId-21179.html
What is the difference between Notes Payable and Accounts Payable?
While both of these are liabilities, Notes Payable involves a written promissory note. For example, if your company wishes to borrow $100,000 from its bank, the bank will require company officers to sign a formal loan agreement before the bank provides the money. (The bank might also require your company to pledge collateral and for the company owners to personally guarantee the loan.) Perhaps the loan paperwork will be a half inch high. Your company will record this loan in its general ledger account, Notes Payable. (The bank will record the loan in its general ledger account Notes Receivable.)
Contrast the bank loan with phoning one of your company’s suppliers and asking for a delivery of products or supplies. On the next day the products arrive and you sign the delivery receipt. A few days later your company receives an invoice from the supplier and it states that the payment for the products is due in 30 days. This transaction did not involve a promissory note. As a result, this transaction is recorded in your company’s general ledger account Accounts Payable. The supplier will record the transaction with a debit to its asset account Accounts Receivable (and a credit to its account Sales).
http://blog.accountingcoach.com/notes-payable-accounts-payable/
