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Notes Payable definitions Flashcards

Notes Payable definitions
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  • Notes Payable
    Formal written obligations to repay borrowed funds with interest by a specified maturity date, recorded as liabilities on the balance sheet.
  • Principal
    Original amount of money borrowed under a note, excluding any interest, and used as the basis for interest calculations.
  • Maturity Date
    Specific date stated in a contract when the borrowed principal and any remaining interest must be repaid in full.
  • Interest Rate
    Annual percentage charged on the principal, determining the cost of borrowing and the amount of interest accrued.
  • Time Factor
    Proportion of a year used in interest calculations, reflecting the period the note has been outstanding.
  • Interest Expense
    Cost recognized for using borrowed funds over time, reducing net income and equity on financial statements.
  • Interest Payable
    Liability account representing interest that has accrued but not yet been paid as of the financial statement date.
  • Short-Term Note
    Obligation with a maturity of one year or less, typically requiring a single payment of principal and interest at maturity.
  • Long-Term Note
    Obligation with a maturity exceeding one year, often involving periodic interest payments before principal repayment.
  • Adjusting Entry
    Accounting record made at period end to recognize accrued interest expense and update related liabilities before payment.
  • Accounts Payable
    Liability for goods or services received on credit, usually not involving formal contracts or interest charges.
  • Face Value
    Stated amount on the note representing the principal to be repaid at maturity, used in interest calculations.
  • Journal Entry
    Formal accounting record documenting transactions such as borrowing, accruing interest, and repaying notes.
  • Liability
    Obligation arising from past transactions, requiring future payment of assets or services, such as notes payable or interest payable.
  • Equity
    Residual interest in assets after deducting liabilities, affected by expenses like interest expense recognized on notes.