What is the difference between a note payable and a bond payable?
For accounting purposes, a note payable and a bond payable are similar. That is, both are 1) written promises to pay interest and to repay the principal amount or maturity amount on specified future dates, 2) both are reported as liabilities, and 3) interest is accrued as a current liability.
If the bond or the note has its principal or maturity due within one year of the balance sheet date and the payment will cause a reduction in working capital, the bond or note will be reported as a current liability. If the bond or note will not be due within one year of the balance sheet date or if the maturity date is within one year but will not cause a reduction in working capital when it becomes due, it will be reported as a long-term liability. (For example, there may be a bond sinking fund or a formal agreement for refinancing the debt with new long-term debt or stock.)
Outside of accounting, I am certain there are differences. For example, debt with an original maturity date of less than a year is likely to be a note. However, some notes can be longer than one year. Government debt securities might be bills, notes, or bonds depending on the original maturity date of the debt security. Perhaps some notes do not specify interest.
Learn more about Bonds Payable.
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