These are liabilities that can create a company's insolvency if cash is inadequate. An unhappy and dissatisfied set of current creditors can threaten the survival of the company. The best way to keep these creditors happy is to keep their obligations current. Notes payable are obligations in the form of promissory notes with short term maturity dates of less than 12 months. The notes payable always include only the principal amount of the debt.
Any interest owed is listed under accruals.
The use of funds must be short term so that the asset matures into cash prior to the obligation's maturation. Proper matching would indicate borrowing for seasonal swings in sales which cause swings in inventory and receivables, or to repay accounts payable when attractive discount terms are offered for early payment. Accounts Payable Accounts Payable are obligation due to trade suppliers who have provided inventory or goods and services used in operating the business. Whenever possible you should take advantage of payment terms as this will help keep your costs down. If the company is paying its suppliers in a timely fashion, days payable will not exceed the terms of payment.