A promissory note is the source document for issuing a _________.

A promissory note is the source document for issuing a _________.

• A. Account payable
• B. Note payable
• C. Revenue
• D. Inventory

Answer: (B)

A promissory note is a written promise to pay a specific amount of money by a future date. When a business issues one, it creates a formal obligation to repay, recorded as a note payable, a liability on the balance sheet. The promissory note is the source document because it provides the exact debt, amount borrowed, and repayment terms that justify recording the liability. For example, borrowing cash by signing a promissory note would be recorded as a debit to Cash and a credit to Note payable. This item is not related to accounts payable (which comes from supplier invoices), revenue (which is income), or inventory (an asset).

A promissory note is a written promise to pay a specific amount of money by a future date. When a business issues one, it creates a formal obligation to repay, recorded as a note payable, a liability on the balance sheet. The promissory note is the source document because it provides the exact debt, amount borrowed, and repayment terms that justify recording the liability. For example, borrowing cash by signing a promissory note would be recorded as a debit to Cash and a credit to Note payable. This item is not related to accounts payable (which comes from supplier invoices), revenue (which is income), or inventory (an asset).