Notes payable
In one sentenceWritten promises, such as bills of exchange, in which the business undertakes to pay a set amount to another party on a set date; they are presented within liabilities.
Simply put
When a supplier asks for a stronger guarantee than the invoice, you sign a bill for them. From that moment the debt becomes a note payable with a due date that cannot easily be postponed.
It is presented as current if it falls due within a year, and non-current if it falls due later.
Worked example
An appliance store bought goods for 40,000 SAR and signed a bill to the supplier due after two months.
On purchase: Dr Purchases, Cr Notes payable40,000
On payment: Dr Notes payable (debit)40,000
Cr: Bank (credit)40,000
Notes payable balance after payment0 SAR
Don't confuse it with
Accounts payableAccounts payable are amounts due under ordinary invoices, while notes payable are amounts documented by a written promise.