mortgage payable
When a business buys a building or a piece of land but cannot pay the whole price in cash, it borrows the rest from a bank — and the bank wants security. So the property itself is pledged as collateral: if the company fails to pay, the lender can seize and sell the building to recover the loan. That secured, property-backed loan, seen from the borrower's books, is a mortgage payable.
A mortgage payable is a long-term liability for money borrowed to buy real estate, secured by that real estate as collateral. The borrower repays it through regular installments — usually monthly — over many years. Each payment is split into two parts: interest on the outstanding balance, and a repayment of principal that reduces the loan. Early on, most of each payment is interest and little is principal; over time the mix flips. For example, on a 200,000 mortgage, an early monthly payment might be mostly interest with only a small slice trimming the balance, while a late payment is almost all principal.
Mortgages payable matter because real estate is expensive and the loans are large and long-lived, so they often dominate a company's long-term liabilities. On the balance sheet, the portion due within the next year is shown as a current liability and the rest as non-current. Accountants track the declining principal balance carefully, recording interest expense and principal reduction separately with each installment, so the books always reflect the true remaining debt.
A company borrows 300,000 to buy a warehouse, repaid monthly over 20 years. On a payment of 2,000, say 1,500 is interest on the current balance and 500 reduces the principal. Next month, slightly less goes to interest and slightly more to principal, because the balance has shrunk a little.
Each installment is part interest and part principal, with the principal share growing as the loan ages.
A mortgage payment is not all expense — only the interest portion is an expense, while the principal portion simply reduces the liability, so treating the whole payment as an expense overstates costs.