Current portion of a note payable

Definition

The current portion of a note payable is the amount of principal that is due within one year from the balance sheet date. It is classified as a current liability on the balance sheet.

5 Must Know Facts For Your Next Test

1. The current portion of a note payable is separated from the long-term portion on the balance sheet.
2. It represents an obligation that the company must settle within the next year.
3. Failure to correctly classify this portion can lead to misstated financial statements.
4. This classification helps investors and creditors assess a company's short-term liquidity.
5. The remaining part of the note that is due beyond one year is classified as a long-term liability.

Review Questions

Related terms

Note Payable: A written promise to pay a specified amount of money at a future date, often with interest.

Current Liabilities:

Obligations that are expected to be settled within one year or the operating cycle, whichever is longer.

Long-Term Liabilities: Obligations that are due beyond one year from the balance sheet date.