What is meant by the term 'notes payable'?

The term 'notes payable' refers to a formal written agreement whereby a borrower, typically a business, commits to repay a specified sum of money to a lender at a future date. This document outlines the terms of the loan, including the interest rate, repayment schedule, and other pertinent details. In a funeral service context, this might relate to financing options that a funeral home extends to clients or obligations that the funeral home incurs.

By designating it as a 'written promise of a customer to pay a specified sum in the future,' it emphasizes the commitment involved in such agreements, ensuring that both parties have a clear understanding of their financial responsibilities. This understanding is crucial for maintaining financial integrity and planning within the business operations.

The other options do not accurately capture the essence of 'notes payable' in this context, as they either refer to the perspectives or obligations of customers or creditors without the specific focus on the formalized structure of a loan agreement from the borrower’s perspective.