When a company issues a promissory note,the accountant records an entry that includes a credit to Note Payable for the
A) face value of the note.
B) face value of the note plus the interest that will accrue.
C) face value less the interest that will accrue.
D) maturity value of the note.

Question

Quizplus · Accepted Answer

The promissory note represents a liability of the company, which is recorded as Note Payable on the balance sheet. The face value of the note is the amount that the company owes to the creditor and is the amount that should be credited to Note Payable. Interest that will accrue is not recorded at the time of issuance, but will be recorded as an expense over time as it accrues. The maturity value of the note may differ from the face value if there are associated fees or discounts, but it is not relevant to the initial entry for the issuance of the note.

When a Company Issues a Promissory Note,the Accountant Records an Entry