When a corporation borrows money from another entity such as a bank, it must
repay the amount borrowed. The person to whom the corporation owes money is
called a creditor. This obligation to repay a creditor is termed a liability and can take
many forms. A common way for a corporation to obtain cash is to borrow money with
the promise to repay the amount borrowed plus interest at a future date. Such borrowings
are commonly referred to as notes payable. A special form of note payable that is
used by corporations to obtain large amounts of money is called a bond payable.