A short-term note payable:
A) Is a written promise to pay a specified amount on a definite future date within one year or the company's operating cycle, whichever is longer.
B) Is a contingent liability.
C) Is an estimated liability.
D) Is not a liability until the due date.
E) Cannot be used to extend the payment period for an account payable.

Question

Quizplus · Accepted Answer

A short-term note payable is a liability that represents a written promise to pay a specified amount on a definite future date within one year or the company's operating cycle, whichever is longer. This liability is different from a contingent liability, which represents a potential obligation that depends on a future event, or an estimated liability, which represents an obligation that the company can reasonably estimate but has not yet incurred. A short-term note payable is a liability as soon as it is issued, not only on the due date. Finally, a short-term note payable is a tool that can be used by a company to extend the payment period for an account payable.

A Short-Term Note Payable