Question

What is the difference between a note payable and an account payable?

Short answer

Basis of difference between notes payable and accounts payable can be made on – definition, nature, duration, and type of cash flow.

Step-by-step solution

Notes Payable

Notes payable is a kind of written document that states the terms of the repayment and interest rate for the borrowed amount.

Accounts Payable

Accounts payable are the short-term dues to be paid to suppliers, vendors, etc. These accounts payable are the result of normal operating activities.

Point of difference

Basis of difference	Notes Payable	Accounts Payable
1. Meaning	Notes payable are the written agreement between two parties for repayment of the borrowed amount.	Accounts payable are the short-term dues for making purchases or borrowings in the normal course of business.
2. Nature	These are in written form.	This is not in written form.
3. Duration	This can be for a short period or a long period.	This is only for a short period of time.
4. Cash flow type	Cash flow raised through notes are classified under financing activity.	This is the result of normal operating activity, thus comes under operating cash flow.