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Note Payable, Promissory Note
Explaining Definitions, Meaning, Balance Sheet Examples

 

A note payable is a written obligation to pay a debt at or before a specific time.

Notes Payable appear on the Balance sheet under Short Term and Long Term Liabilities.

What is a Note Payable?

A note payable is a liability (debt) of an individual or organization, evidenced by a written promissory note to pay by a specific date. Notes payable may include instruments such as bank loans, mortgages, and other agreements to pay, sometimes called debentures.

Where Are Notes Payable on the Balance Sheet?
Detailed Balance Sheet Example With Notes Payable

Notes payable appear under Liabilities on the Balance sheet.

  • Notes payable in more than one year appear under Long term liabilities, except for any portion payable within a year.

    As long term liabilities, Notes payable help define the company's degree of leverage and are a component of both the financial structure and the capital structure.
  • Short term notes and any portions of long term notes payable within a year are carried as Current liabilities. Current liabilities thus contribute only to the company's financial structure but not capital structure.

Exhibit 1 below is a detailed company balance sheet, showing both Long Term Bank Notes Payable, and Current Liabilities with but with more detail. Definitions for the major categories and line items appear below the example.

Grande Corporation                                   Figures in $1,000's
Balance Sheet at 31 December 20YY   
ASSETS
Current Assets
   Cash
   Short-term investments
   Accounts Receivable
      Less allowance doubtful accts
      Net accounts receivable
   Notes receivable short term
   Inventories
      Raw materials
      Work in progress
      Finished goods/merchandise
      Operating & office supplies
            Total Inventories
   Prepaid exp, insurance, def taxes
          Total Current Assets




1,969
   137



    611
1,692
3,664
      19


1,369
  137


1,832
     20





5,986
  265
















9,609
Long-Term Investments and Funds
   Common stock held
   Preferred stock held
   Bonds Held / Sinking funds
   Other Long-Term Investments
          Total Long-Term Investments
    
  493
  184
  364
  419





1,460
Property, Plant & Equipment
   Factory Manufacturing Equipment
      Less accumulated depreciation
      Net factory mfr equipment
   Store Equip / Selling Assets
      Less accumulated depreciation
      Net store/selling equipment
   Computer systems
      Less accumulated depreciation
      Net computer systems
           Total Property, Plant & Equip
 
5,983
 2,782

5,456
 1,292

4,721
 2,370




3,201

4,164


  2,351










9,716
Intangible Assets
   Copyrights
   Trademarks and Patents
   Goodwill
          Total Intangible Assets
    
1,014
108
  100




1,222
Other Assets
                    Total Assets
         68
22,075
LIABILITIES
Current Liabilities
   Accounts payable
   Notes payable, short-term
   Current portion of long-term debt
   Accrued expenses, Interest payable
   Unearned revenues
   Taxes payable Other withholding
          Total Current Liabilities



 1,642
    912
    349
     146
     274
    141








3,464
Long-Term Liabilities
   Bank notes payable
   Bonds payable, other LT liabilities
          Total Long-Term Liabilities
                    Total Liabilities
     
912
 4,562



 5,474
8938
OWNERS EQUITY
Contributed Capital
   Preferred stock
   Common stock
   Contributed capital excess of par
          Total Contributed Capital

Retained Earnings
          Total Owners Equity


3,798
4,184
 1,457





9,439

 3,698








13,137
          Total Liabilities and Equities
    22,075
 

Exhibit 1. A Balance sheet exampl with short-term and long-term Notes Payable. This example represents about the maximum detail must firms present in the Annual Report Balance sheet.