Notes payable

The second most important source of short-term financing is notes payable from commercial banks. Banks normally reqmre a Borrower to maintain a compensating balance. For example, if a company requires a loan of 100,000, it must borrow more than this, say, 120,000 (on which it pays interest), in order to maintain a minimum checldng-accouut balance of 20,000. Commercial banks also provide a wide variety of other services that can be of great help to companies in temporary financial difficulties. 

Liabilities are the obhgations that the company owes to creditors and stockholders. Current liabilities are obhgations that come due within a year and include accounts payable (money owed to creditors for goods and services), notes payable (money owed to banks, corporations, or other lenders), accrued expenses (salaries and wages to employees, interest on borrowed funds, fees due to professionals, etc ), income taxes payable, current part of long-term d t, and other current liabilities due within the year. 

Current liabilities Accounts payable Line of credit—Wells Fargo Payroll taxes payable Sales tax payable Federal income tax pay—current State income tax pay—current Total current liabilities Noncurrent liabilities Note payable Loan payable... 

Numerous activities occur on a daily basis that can change assets (things that we own, e.g., a computer), liabilities (debts that we owe, e.g., notes payable), and the owner s equity (the worth of the owner, e.g., Amy Harris, capital). These changing events must be entered in accmmting records. Developing a set of financial records is the responsibility of the firm s owner, and a system should be developed that is compatible with the company s owner and managers who use this information. 

Current Liabilities. Current liabilities are debts that must be paid within a year from the date of the balance sheet. They are paid from the current assets. Current liabilities include accounts payable, notes payable, accrued expenses payable, and income taxes payable. 

Notes payable include the money owed to banks and other creditors. Promissory notes are in this category. 

Current Liabilities Accounts Payable Notes Payable Accrued Expenses Payable Federal Income Taxes Payable Total Current Liabilities... 

The total liabilities are what a company owes and consist of the sum of current and long-term liabilities. Current liabilities are debts that must be paid within a year from the date of ffie balance sheet. The total current liabilities are ffie sum of the accounts payable, notes payable, accrued expenses payable, as well as income taxes payable from current assets. Accounts payable include such items as mvoices for raw materials, supplies, and others, that a company has purchased from suppliers and for which payment is due on a 30-, 60-, or 90-day basis. Notes payable include monies owed to banks and offier creditors as well as promissory notes. Accrued expenses payable include such entries as salaries, wages, mterest on borrowed funds, insurance premiums, pensions, and so on. Income taxes payable are ffie debt owed to federal, state, and local governments. These taxes are usually paid on a quarterly basis and commonly isolated from other expenses. 

Accounts payable Due to subcontractors Provision for income taxes Equipment contracts Long-term notes payable Total liabibties... 

Long-term notes payable Maybe the company borrowed money to acquire another company. 

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