Question

A major difference between Accounts Payable and Notes Payable is that:

A. only Accounts Payable are classified as current assets.

B. Notes Payable are only used for receiving cash.

C. Notes Payable are only long-term assets.

D. only Notes Payable charge interest.

Answer 1

The major difference between Accounts Payable and Notes Payable is that Accounts Payable are classified as current assets, while Notes Payable can be categorized as current or long-term liabilities.

Step-by-step explanation:

The major difference between Accounts Payable and Notes Payable is that:

1. Only Accounts Payable are classified as current assets, while Notes Payable can be classified as current or long-term liabilities depending on their due date. Accounts payable represents the money owed by a company to its suppliers or vendors for goods or services received on credit.
2. Notes Payable can be used for receiving cash or other types of assets. For example, a company may issue a note payable to borrow money from a bank or to purchase equipment.
3. Both Accounts Payable and Notes Payable can charge interest, depending on the terms and agreements between the parties involved.