An accounts payable is a liability that is short term, usually between two weeks and one month, while notes payable is a liability that has a longer term, the shortest of which is six months.Accounts payable is based on good faith and requires no written agreement other than a sales invoice while notes payable requires a written contract which must be signed by the debtor and which states the terms of the account.Accounts payable is not charged with interest or other fees while notes payable have a specific interest rate and service charges.Notes payable are usually offered by banks and other financial institutions while accounts payable are offered by suppliers of goods and services.
|Basis||Accounts Pyable||Notes Payable|
|Definition||Accounts Payable is the obligation that a business owes to its creditors for buying goods and services.||
Note payable is a written promissory note under which a borrower obtains a specific amount of money from a lender and promises to pay it back with interest over a predetermined time period.
|Mode of agreement||
Accounts Payable is an informal and verbal agreement.
|Notes Payable is an formal and written agreement.|
|Origin||It originates from the purchase of tradable items or inventories.||It originates from the purchase of tradable items or inventories and it may also evolve in case of purchase of long-lived assets or borrowing or to satisfy the existing obligation.|
|Terms||There is no specific terms such as maturity period ,interest rate included with accounts payable.||There is specific terms such as maturity period ,interest rate included with notes payable.|
|Interest||There is no interest associated with the accounts payable.||Interest is explicitly or implicitly involved with notes payable.|
|Time||It is a short term liability.||It may be short-term or long term liability.|
|Risk of custom
|It is created in case of low risk customer.||It is created in case of high risk customer.|
|Possibility||Accounts payable can be converted into notes payable.||Notes payable can be never converted into accounts payable.|