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Accounting Careers Certificates of Achievement Take the Tour How does Notes payable affect the accounting equation?Payment of a Note Payable
For example, a $500 payment is made to a note payable on Sept. 28. This causes $500 to be deducted from the cash account, which occupies the assets side of the equation. At the same time, $500 is deducted from notes payable, which represents part of the liabilities side of the equation.
What are the effects of transactions on the accounting equation?If a transaction decreases the total assets of a business, then the sum of its total liabilities and owner's equity may or may not decrease depending on the nature of the transaction. If a transaction decreases the total assets of a business, then the right side of the accounting equation MUST reduce as well.
What will be the effect of this transaction to owner's equity the company purchases land by paying half in cash and signing a note payable for the other half?The cost of land purchased is an asset of the business, cash paid shall decrease the assets but cost of land shall increase it & at the same time, the note payable shall be a liability to be paid.
Is Notes payable an asset liability or equity?Notes payable appear as liabilities on a balance sheet. Additionally, they are classified as current liabilities when the amounts are due within a year.
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