The journal entry to record the issuance of a note for the purpose of converting an existing account payable would be
A) debit Cash; credit Accounts Payable
B) debit Accounts Payable; credit Cash
C) debit Cash; credit Notes Payable
D) debit Accounts Payable; credit Notes Payable

Question

Quizplus · Accepted Answer

The correct journal entry for converting an account payable into a note payable involves debiting (decreasing) Accounts Payable to remove the liability under accounts payable and crediting (increasing) Notes Payable to record the new liability under a formal note agreement. This reflects the change in the type of liability without affecting cash.

The Journal Entry to Record the Issuance of a Note