Question

Cory issued a note to his creditor in exchange for an account. Cory records the transaction by debiting

A. Notes Payable and crediting Accounts Payable.
B. Notes Receivable and crediting Accounts Receivable.
C. Accounts Payable and crediting Notes Payable.
D. Accounts Receivable and crediting Notes Payable.

Answer 1

The correct answer is letter C. Accounts Payable and Crediting Notes Payable.

Answer 2

The answer is D. a debit to accounts payable and a credit to notes payable. This is because Cory issued a note to his creditor as a promise that he will pay the creditor. With this, he will be gaining a Notes Payable, or a promissory note stating that he will pay, and will be losing an Accounts Payable. So according to the rules of accounting, if a liability is debited, then it will be lessened from the books of the business. If a liability is credited, however, then it will be added to the records of the business.