How to Figure Notes Payable in Accounting
The amount of a company’s notes payable is the total money it owes creditors, such as a bank, on outstanding loans that require a promissory note guaranteeing repayment. A company reports notes payable as a liability on its balance sheet to show its financial obligations to financial statement users. The amount of notes payable can change each accounting as a company pays down its existing loans and obtains new loans. You can figure your notes payable balance at the end of an accounting period from your accounting records.
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Instructions
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Find in your accounting records the balance of your notes payable account at the beginning of the accounting period. For example, assume your notes payable account balance was $100,000 at the beginning of the period.
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Calculate the sum of the credits you made to your notes payable account in your records during the period. Credits increase your notes payable account. In this example, if you made credits of $5,000 and $10,000, add $5,000 and $10,000 to get $15,000 in total credits to notes payable.
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Calculate the sum of the debits you made to notes payable in your records. Credits decrease your notes payable account. In this example, if you made debits of $15,000 and $10,000, add $15,000 and $10,000 to get $25,000 in total debits.
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Add total credits to your beginning notes payable balance. In this example, add $15,000 in total credits to $100,000 to get $115,000.
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Subtract total debits from your result to figure the notes payable balance at the end of the accounting period. Continuing the example, subtract $25,000 in total debits from $115,000 to get $90,000 in notes payable at the end of the accounting period.
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