Since N/P is debt, the borrower incurs interest expense that must be paid together with the principal amount at maturity date. N/P ranges from short-term loans for solving cash flow problems to long-term loans for purchasing machinery or even buildings. These agreements can be short-term contracts with a due date falling within a year or long-term with a maturity period beyond one year. If the liability is for more than a year, it becomes a long-term liability.
- Amortized agreements are widely used for property dealings, be it a home or a car.
- As a result, statutes have increasingly...