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The portion of long-term liabilities that must be paid in the coming 12-month period are classified as current liabilities.
Explain the reporting of the current portion of a long-term debt
Long-termliabilities are liabilities with a due date that extends over one year, such as bonds payable with a maturity date of 10 years. Long-term liabilities are a way to show the existence of debt that can be paid in a time period longer than one year.
The portion of long-term liabilities that must be paid in the coming 12-month period are moved from the long-term liability section to the current liability section of the balance sheet.
Current debt on the balance sheet is listed by maturity date, in relation to the due date of other current liabilities. If a current liability section has an accounts payable account (due in 30 days), a current balance of loans payable (due in 12 months) would be listed after accounts payable.
Evidence of a long-term debt, by which the bond issuer (the borrower) is obliged to pay interest when due, and repay the principal at maturity, as specified on the face of the bond certificate. The rights of the holder are specified in the bond indenture, which contains the legal terms and conditions under which the bond was issued. Bonds are available in two forms: registered bonds and bearer bonds.
Long-term liabilities are liabilities with a due date that extends over one year, such as a notes payable that matures in 2 years. In accounting, the long-term liabilities are shown on the right side of the balance sheet, along with the rest of the liability section, and their sources of funds are generally tied to capital assets. Examples of long-term liabilities are debentures, bonds, mortgage loans and other bank loans (it should be noted that not all bank loans are long term since not all are paid over a period greater than one year. ) Also long-term liabilities are a way for a company to show the existence of debt that can be paid in a time period longer than one year, a sign that the company is able to obtain long-term financing .
The portion of long-term liabilities that must be paid in the coming 12-month period are classified as current liabilities. The portion of the liability considered "current" is moved from the long-term liabilities section to the current liabilities section. The position of where the debt should be disclosed is based on its maturity date in relation to the due date of other current liabilities. For example, a loan for which two payments of USD 1,000 are due--one in the next 12 months and the other after that date--would be split into one USD 1000 portion of the debt classified as a current liability, and the other USD 1000 as a long-term liability (note this example does not take into account any interest or discounting effects, which may be required depending on the accounting rules that may apply). If the current liability section already has an accounts payable account (balance which is usually paid off in 30 days), the current portion of the loan payable (due within 12 months) would be listed after accounts payable.
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