What do you call promissory notes that are signed by a business and issued to a creditor?

What do you call promissory notes that are signed by a business and issued to a creditor?

• A. Common stock
• B. Notes payable
• C. Bonds
• D. Accounts receivable

Answer: (B)

Promissory notes that are signed by a business and issued to a creditor are referred to as notes payable. This term denotes a formal promissory note, which is a written pledge to pay a specified amount of money at a future date. Notes payable represent a liability on the balance sheet, as they indicate the business's obligation to repay its creditors. This is distinct from common stock, which represents ownership in a company; bonds, which typically relate to debt financing through securities; and accounts receivable, which pertain to amounts owed to a business by its customers for goods or services provided. Understanding notes payable is crucial in accounting, as they reflect a company’s borrowing status and financial commitments.

Promissory notes that are signed by a business and issued to a creditor are referred to as notes payable. This term denotes a formal promissory note, which is a written pledge to pay a specified amount of money at a future date. Notes payable represent a liability on the balance sheet, as they indicate the business's obligation to repay its creditors. This is distinct from common stock, which represents ownership in a company; bonds, which typically relate to debt financing through securities; and accounts receivable, which pertain to amounts owed to a business by its customers for goods or services provided. Understanding notes payable is crucial in accounting, as they reflect a company’s borrowing status and financial commitments.