Multiple choice

A business borrows money on a note payable. Which of the following happens?

  1. A credit to cash

  2. A credit to capital

  3. A debit to notes expense

  4. A credit to notes payable

Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

When a business borrows money, it receives cash (an asset) and incurs a liability. Increasing a liability requires a credit entry.