When recording notes payable, which account is typically credited?

When notes payable is recorded, the account that is typically credited is the Notes Payable account. This is because issuing a note payable represents an obligation to pay back a debt, which increases the liabilities of the company. In accounting, when a liability is created, the corresponding entry requires a credit to the Notes Payable account.

When a company borrows money through a note, it receives cash, which is debited to the Cash account, reflecting an increase in assets. The credit to Notes Payable acknowledges that the company has taken on a debt that it is obligated to repay in the future. This process ensures that the accounting equation remains balanced, where assets equal liabilities plus equity.

In this context, the other options do not represent the correct accounting treatment for recording notes payable. Cash is debited, not credited, Accounts Payable refers to amounts owed for goods or services received that have not yet been paid, and Interest Expense reflects the cost of borrowing, which would typically be recorded later and not when the note is initially issued. Thus, the correct response aligns with the fundamental principles of double-entry accounting, specifically concerning how liabilities are recognized.