notes payable journal entries

Notes payable journal entries | PU 2017 Fall

notes payable journal entries

Financial accounting-ii Receivables

Pokhara University (PU) 2017 Fall Q. No. 15

Civil Company issued 9 months promissory note on 1st November, 2015 for cash. The interest rate on the note was 12% p.a. The amount of note was Rs. 100,000.

Required: Prepare all necessary journal entries on issue, year end and maturity date on note. [10]

Solution

Journal entries

In the book of Civil Company

1st November 2015

Cash account a/c Dr. Rs. 100,000

Notes payable a/c            Rs. 100,000

(To record the issue of promissory note for nine months)


31 December 2015

Interest expenses a/c Dr. Rs. 2,000

Interest payable a/c             Rs. 2,000

(To record the interest on a note for the two months)


31 July 2016

Interest expenses a/c Dr. Rs. 7,000

Interest payable a/c Dr. Rs. 2,000

Notes payable a/c Dr. Rs. 100,000

Cash a/c                                   Rs. 109,000

(To record the payment for the note payable along with interest and principal.)


Here, in notes payable journal entries

Two months interest expenses = 12% of 100,000 × 2/12 = Rs. 2,000

Seven months interest expenses = 12% of 100,000 × 7/12 = Rs. 7,000

See, related solutions

Notes payable journal entry | PU 2016 spring

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