Asked by: Harjeet Neuenkirchbusiness and finance debt factoring and invoice discounting
How do you record a promissory note in accounting?
Moreover, what is the journal entry for notes payable?
Issued for Cash The first journal is to record the principal amount of the note payable. The debit is to cash as the note payable was issued in respect of new borrowings.
Considering this, do you record a promissory note?
Unlike a mortgage or deed of trust, the promissory note is not recorded in the county land records. The lender holds the promissory note while the loan is outstanding. When the loan is fully paid off, the note will be marked as paid in full and returned to the borrower.
The amount borrowed is recorded by debiting Cash and crediting Notes Payable: When the note is repaid, the difference between the carrying amount of the note and the cash necessary to repay that note is reported as interest expense.