Notes Payable

What notes payable covers

A note payable is a written promise to repay a stated amount, usually with interest, on a set date. Interest accrues with the passage of time rather than when it is paid, so period-end accruals are needed whenever the payment date and the reporting date do not coincide. Notes are split between current and non-current according to when settlement falls due.

Challenges here cover issue, interest accrual, and settlement entries.

Where marks are usually lost

• Recognising interest only when it is paid.
• Failing to apportion interest for the part of the period the note was outstanding.
• Classifying the whole balance as non-current when part is repayable within twelve months.