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View Full Version : How borrowing cash by signing long-term note payable affect financial statements?


brit_chantal
Jun 23, 2009, 09:14 AM
When borrowing cash by signing long-term note payable, how does this affect total assets, total liabilities, total equity, net income, operating, financing and investing activities?

rehmanvohra
Jun 30, 2009, 11:37 AM
When borrowing cash by signing long-term note payable, how does this affect total assets, total liabilities, total equity, net income, operating, financing and investing activities?

The entry is
Debit Cash
Credit notes payable

The effect is that the total assets and total liabilities have increased.
Debt ratio will increase
Net income will decrease on accrual of interest
Operating activities - affected by the amount of interest accrued and paid
Investing activity - no effect
Financing activity - inflow of long term notes will be reported

morgaine300
Jul 3, 2009, 03:00 AM
Really need to stop doing people's homework for them. That isn't the idea behind this forum's existance:

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