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The note is issued when the borrower creates the note with the lender and receives cash equaling the note amount.
Scenario: On May 1st, 2022, you borrow a $1,000, 12% annual interest note due in 9 months from your local bank. Write the journal entry for May 1st, 2022.
We created the note on May 1st, 2022, and we're writing the journal entry for May 1st, 2022. Therefore, we're recording the issuance of the note.
Debit to Cash because as the borrower, we're receiving $1,000 in cash when the note is issued, and assets (Cash) have a normal debit balance.
Credit to Notes Payable because we now owe $1,000 back to the bank in the future, and liabilities (Notes Payable) have a normal credit balance.
