Notes Payable Flashcards
1
Q
what is note
A
company borrows money from the bank. like a agreement or a contra account
2
Q
loan taken out, what’s the journal entry
A
Debit cash
Credit Notes Payable
3
Q
what does the term note mean
A
there is some interest involved that is related to the liability
4
Q
whats the formula for interest
A
Principal * Interest rate * Fraction of year
5
Q
when interest is paid on note, whats the journal entry
A
Debit Interest Expense
Credit Cash or Interest payable
6
Q
prinicpal amount of note is paid to bank, journal entry
A
Debit Notes Payable
Credit cash
7
Q
Amount related to last interest payment on note, whats the journal entry
A
Debit Notes Payable
Debit Interest Expense
Credit Cash
