question about balance sheet

[blueheaven]

Hi friends, I have a question about balance sheet. At the balance sheet date, a business owes a mortgage not payable of $500,000, the terms of which provide for monthly payments of $13,750. Amount would be reported as a current liability or as a long term liability? Can someone explain this to me or give me a hint as how to do this please?

[Acid]

Hi

Current liability is any liabilty which a business owes within the 12months . For example : Trade creditors ,Bank overdrafts etc.

Long term liability is a debt which is payable in more then 12 month .

I cannot ascertain from your question about the duration of mortgage . Also the figure of $13 750 makes me think that this is the interest on mortage which should be paid monthly so this must be a current liability.

How ever I am not sure , But this is what I can think of based on the info you gave me.


Cheers!

Acid

[Acid]

Current liabilities — these liabilities are reasonably expected to be liquidated within a year. They usually include payables such as wages, accounts, taxes, and accounts payables, unearned revenue when adjusting entries, portions of long-term bonds to be paid this year, short-term obligations (e.g. from purchase of equipment), and others.


Long-term liabilities — these liabilities are reasonably expected not to be liquidated within a year. They usually include issued long-term bonds, notes payables, long-term leases, pension obligations, and long-term product warranties.— In these liabilities a company has to pay after a fixed or long period For ex:- Long term bank loans up to 1yr or more than one 1yr.


Learn these definitions as they are really important in making the Balance Sheet , Then once you understand what Current and Long term liabilties is all about , then you can apply these to all the liabilities in question and put them into the right categories!


Best of luck!

Acid