Notes Payable Long-Term
Definition: Notes Payable (Long-Term) are written obligations due beyond 12 months. A business records the note at face value on issuance, then makes periodic …
Scope:ModerateDifficulty:Easy
Notes Payable (Long-Term) are written obligations due beyond 12 months. A business records the note at face value on issuance, then makes periodic payments that cover both interest expense and principal reduction. Use the interactive calculator below to explore how each payment splits between interest and principal over the life of the loan.
Notes Payable (Long-Term)Long-term liability — written obligation due beyond 12 months. Credits increase the balance; debits decrease it as principal is repaid. Calculator
On May 14, 2026, a business borrows $100,000.00 by signing a 5-year note at 5% annual interest, repaid yearly over 5 payments. Each payment includes $20,000.00 in principal plus interest on the outstanding balance.
| Date | Account | DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue. | CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses. |
|---|---|---|---|
| May 14, 2026 | CashAsset account. Debits increase the balance. Credits decrease the balance.Asset+ | $100,000.00 | |
| Notes Payable (Long-Term)Long-term liability — written obligation due beyond 12 months. Credits increase the balance; debits decrease it as principal is repaid.Liability+ | $100,000.00 |
Paymentof 5
| Date | Account | DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue. | CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses. |
|---|---|---|---|
| May 14, 2027 | Interest ExpenseExpense account — cost of borrowing money. Debits increase the balance. Credits decrease the balance.Expense+ | $5,000.00 | |
| Notes Payable (Long-Term)Long-term liability — written obligation due beyond 12 months. Credits increase the balance; debits decrease it as principal is repaid.Liability− | $20,000.00 | ||
| CashAsset account. Debits increase the balance. Credits decrease the balance.Asset− | $25,000.00 |
Effect: On May 14, 2026, Cash increases by $100,000.00 (asset +) and Notes Payable (Long-Term) increases by $100,000.00 (liability +). On May 14, 2027, Interest Expense increases by $5,000.00 (expense +), Notes Payable (Long-Term) decreases by $20,000.00 (liability −), and Cash decreases by $25,000.00 (asset −).
Verification: Issue — Debits $100,000.00 = Credits $100,000.00 | Payment #1 — Debits $25,000.00 = Credits $25,000.00
T-AccountsA visual representation of a ledger account shaped like the letter T. Left side shows debits, right side shows credits. — issuance through payment #1
CashAsset account. Debits increase the balance. Credits decrease the balance.AssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$100,000.00
May 14, 2026
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$25,000.00
May 14, 2027
$75,000.00
Notes Payable (Long-Term)Long-term liability — written obligation due beyond 12 months. Credits increase the balance; debits decrease it as principal is repaid.LiabilityAn obligation the business owes to others. Normal balance: credit. Credits increase, debits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$20,000.00
May 14, 2027
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$100,000.00
May 14, 2026
Normal bal. ▶
$80,000.00
Interest ExpenseExpense account — cost of borrowing money. Debits increase the balance. Credits decrease the balance.ExpenseA cost incurred in the process of earning revenue. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$5,000.00
May 14, 2027
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$5,000.00
Amortization Schedule
| # | Date | Beginning Balance | Payment | Interest | Principal | Ending Balance |
|---|---|---|---|---|---|---|
| 1 | May 14, 2027 | $100,000.00 | $25,000.00 | $5,000.00 | $20,000.00 | $80,000.00 |
| 2 | May 14, 2028 | $80,000.00 | $24,000.00 | $4,000.00 | $20,000.00 | $60,000.00 |
| 3 | May 14, 2029 | $60,000.00 | $23,000.00 | $3,000.00 | $20,000.00 | $40,000.00 |
| 4 | May 14, 2030 | $40,000.00 | $22,000.00 | $2,000.00 | $20,000.00 | $20,000.00 |
| 5 | May 14, 2031 | $20,000.00 | $21,000.00 | $1,000.00 | $20,000.00 | $0.00 |
| Totals | $115,000.00 | $15,000.00 | $100,000.00 | |||
DurationLong-Term
External Links
- Promissory note — Wikipedia