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    rogers2john's Avatar
    rogers2john Posts: 1, Reputation: 1
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    #1

    Mar 26, 2009, 07:32 AM
    Note Payable when arranged
    When somebody goes to bank and takes out a note payable for business expansion does that get added to their capital also to show investment?
    pready's Avatar
    pready Posts: 3,197, Reputation: 207
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    #2

    Mar 26, 2009, 12:00 PM

    The journal entry to record the note payable is:
    Debit Cash for the amount of funds received
    Credit Notes Payable for the amount

    When you use the funds the journal entry is:
    Debit the apporpriate Asset account for the amount
    Credit Cash for the amount

    So if the funds are used for expansion then the organization, the funds used will be a capital expense.
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