Accounts Payable and Notes Payable

➦ An accounts payable is a liability that is short term, usually between two weeks and one month, while notes payable is a liability that has a longer term, the shortest of which is six months.

➦ Accounts payable is based on good faith and requires no written agreement other than a sales invoice while notes payable requires a written contract which must be signed by the debtor and which states the terms of the account.

➦ Accounts payable is not charged with interest or other fees while notes payable have a specific interest rate and service charges.

➦ Notes payable are usually offered by banks and other financial institutions while accounts payable are offered by suppliers of goods and services.

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