Definition
The financial accounting term notes payable refers to the obligations of a company that are in the form of a promissory note, which is a written promise to pay a fixed sum of money to the lender. Notes payable appear on the balance sheet as current liabilities.
Explanation
Current liabilities are debts that must be paid within one year or one operating cycle, whichever is longer. Notes payable are usually classified into one of the following three categories:
Maturing Long Term Debt: The portion of the long term debt that is maturing within the next fiscal period
Trade Notes: The unpaid amount of promissory notes, which are owed to suppliers of goods and services
Short Term Loan Notes: These are short term promissory notes, which are payable to financial institutions such as banks, and are generally related to cash loans.
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