The journal entry a company uses to record the issuance of an interest-bearing note for the purpose of borrowing funds for the business is
A) debit Accounts Payable; credit Notes Payable
B) debit Cash; credit Notes Payable
C) debit Notes Payable; credit Cash
D) debit Cash and Interest Expense; credit Notes Payable

Question

Quizplus · Accepted Answer

When a company issues an interest-bearing note to borrow funds, it receives cash, so it debits Cash. The note represents a liability, so it credits Notes Payable.

The Journal Entry a Company Uses to Record the Issuance