LESSON 20-2 6/4/2018 LESSON 20-2 Notes Payable

Journalizing Notes Payable Classification: current liability (normal balance & increase on credit, decrease on debit) Interest expense – the interest accrued on money borrowed. Signing a NP – journalized in the cash receipts journal Why? – shows the receipt of cash from borrowing money from a creditor Debit – Cash – total borrowed Credit – Notes payable – total borrowed LESSON 20-2

Journalizing Notes Payable Paying a NP – journalized in the cash payments journal Debit – Notes Payable & Interest Expense Credit – Cash (for total maturity value) Signing for an extension of time – journalized in the general journal Debit – Accounts Payable / Company Name Credit – Notes Payable LESSON 20-2

SIGNING A NOTE PAYABLE page 593 May 18. Signed a 90-day, 6% note, $20,000.00. Receipt No. 345. 1 2 3 4 5 1. Write the date. 2. Write the account title. 3. Write the receipt number. 4. Write the principle amount in the General Credit column. 5. Write the same amount in the Cash Debit column. LESSON 20-2

PAYING PRINCIPLE AND INTEREST ON A NOTE PAYABLE page 594 August 16. Paid cash for the maturity value of the May 18 note: principal, $20,000.00, plus interest, $300.00; total, $20,300.00. Check No. 721. 2 3 4 1 6 7 5 1. Write the date. 6. Write the interest expense amount. 2. Write the account title. 7. Write the amount of cash paid. 3. Write the check number. 4. Write the note’s principal amount. 5. Write the account title. LESSON 20-2

SIGNING A NOTE PAYABLE FOR AN EXTENSION OF TIME page 595 June 5. Restaurant Supply signed a 90-day, 12% note to Hayport Company for an extension of time on its account payable, $4,000.00. Memorandum No. 66. 1 2 1. Debit to Accounts Payable 2. Credit to Notes Payable LESSON 20-2

PAYING A NOTE PAYABLE ISSUED FOR AN EXTENSION OF TIME page 596 September 3. Paid cash for the maturity value of the note payable to Hayport Company: principal, $4,000.00, plus interest, $120.00; total, $4,120.00. Check No. 722. LESSON 20-2

TERMS REVIEW page 597 current liabilities interest expense LESSON 20-2