What are notes payable?

Notes payable refer to formal written promises made by a business or individual to pay a specific amount of money at a designated future date. This financial obligation typically arises from loans or financing agreements where the borrowing entity agrees to repay the lender's principal amount, often along with interest. The nature of notes payable is fundamentally different from other financial instruments like invoices or expense documents.

The essence of notes payable involves a clear agreement between the lender and borrower, detailing repayment terms, interest rates, and maturity dates, which makes this option the most accurate description of what notes payable entails. Documents indicating expenses, invoices for services, or cash reserves pertain to other financial transaction types and do not capture the specific arrangement of a promise to pay a defined sum in the future as conveyed in notes payable.