Current portion of long term debt is the principal portion of the debt that must be paid within the next year.
It is important to reflect the current portion of long term debt in a business’s currently liabilities because these payments reduce the availability of working capital (current assets – current liabilities) and reflect the resources available to operate the business.
When current portion of long term debt is not reflected on the statement of financial position (balance sheet) the financials are wrong. Without accurate information management will not have all the information necessary to make sound decisions.
Additionally, if there is long term debt on your statement of financial position (balance sheet) then it is expected there will also be a current liability for the current portion of that debt. Failure to include it may make lenders wonder what else is missing.
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About The Author
Tena L. Chase has over two decades of experience directing financial accounting and business management in a variety of industries. Her work has resulted in significant savings and increased profitability for her clients. She is skilled at ensuring strict adherence to governing polices, regulations, and standards and she has an unwavering commitment to help her clients achieve strong financial performance while upholding the highest ethical standards of the accounting profession.
Highlights of Work Accomplished for Past Clients include:
* Identified more than $500,000 in assets that had been inadvertently written off; added assets to balance sheet and notified tax accountant of changes.
* Discovered and corrected $100,000 in overstated expense and liabilities, resulting in increased net income and owner equity.
* Recommended and set up credit card processing and created Web site to establish organization’s online presence.
* Streamlined billing and accounts payable functions, requiring less time and making information more accessible.
* Increased employee benefits at no additional cost to the employer, while saving the company time and money in benefits administration.
Tena is Licensed by the NACPB as a Certified Public Bookkeeper (CPB) and an Intuit Certified QuickBooks ProAdvisor. She holds a Bachelor of Arts degree in Strategic Management from Dominican University of California, a Bachelor of Science degree in Business Administration from Capella University, and three Associate of Science degrees in business from Mendocino College (Accounting; Small Business Management; Business Administration.) Tena was included in the
2009 edition of Stanford Who's Who. Want more information? www.tlcbusinesssolutions.com/tena.html
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