A business repays the amount borrowed on a note payable by cash. Which of the following accounts will be credited?
A)Accounts Payable
B)Cash
C)Notes Payable
D)Notes Receivable

Question

Quizplus · Accepted Answer

When a business repays a note payable by cash, the Cash account will be credited to record the outflow of cash from the business. This reduces the cash balance and the liability associated with the note payable. Accounts Payable is a liability account that represents money owed to suppliers or vendors for goods or services purchased on credit. Notes Payable is a liability account that represents money borrowed by a business and owed to a lender, while Notes Receivable is an asset account that represents money owed to a business by a borrower. None of these accounts are applicable in this scenario.

A Business Repays the Amount Borrowed on a Note Payable