Notes Payable

• A note payable is a financial instrument in which one party---borrower or customer---agrees to repay another party---lender or supplier---a specified loan amount on a given date. For example, a borrower may record a note payable after signing a loan agreement.
  
  

Notes Receivable

• A note receivable is a financial instrument in which one party---lender or supplier---expects from another party---customer or borrower---a specified amount on a given date. For example, a lender may record a note receivable after advancing funds to a borrower.
  
  

Other Considerations

• Notes receivable and payable are important in modern economies, because they help business partners minimize losses in operating activities. Finance notes may provide a guarantee to the holder if they are secured. Notes receivable are considered short-term assets. Notes payable are short-term liabilities. An accountant reports finance notes in the balance sheet, also known as a statement of financial position.