{"id":39482,"date":"2022-07-20T06:55:31","date_gmt":"2022-07-20T03:55:31","guid":{"rendered":"https:\/\/www.simplbooks.fi\/?p=39482"},"modified":"2025-09-29T13:39:36","modified_gmt":"2025-09-29T10:39:36","slug":"long-term-loan-in-accounting","status":"publish","type":"post","link":"https:\/\/www.simplbooks.fi\/en\/blog\/long-term-loan-in-accounting\/","title":{"rendered":"Liabilities – Long-term loans in accounting"},"content":{"rendered":"\r\n
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Debt capital is money invested in a company that does not belong to the company itself and must be repaid. In other words, it is someone else\u2019s money – plain and simple, typically in the form of debt. Debt capital is divided into two categories: short-term and long-term. Short-term debt must be repaid within one year, while long-term debt has a repayment period extending beyond one year.\u00a0 So, if a loan or installment plan has a term longer than one year, it is considered long-term debt capital.<\/p>\r\n

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\"Vieras<\/p>\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n

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Long-term loan in accounting<\/span><\/h2>\r\n\r\n\r\n\r\n\r\n\r\n

Most often, a long-term loan in accounting refers to a bank loan or installment debt. It’s good to know that taking out a loan or repaying its principal does not affect the company\u2019s profit for the financial year, as these entries appear only on the balance sheet. However, expenses and interest related to the loan repayment are recorded in the profit and loss statement, reducing the financial year\u2019s result.<\/p>\r\n

It\u2019s best to create a separate account under the balance sheet\u2019s long-term liabilities section for each loan. The account can be named using the loan number or another clear identifier. For example, if a company acquires a car through installments, the liability account could be named after the car\u2019s make or license plate. Clear naming makes the balance sheet easier to read and helps match repayments to the correct loan – especially when the company has multiple loans or installment agreements.<\/p>\r\n\r\n\r\n\r\n

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Bank loan in accounting<\/span><\/h2>\r\n\r\n\r\n\r\n\r\n\r\n

A loan taken from a bank or other financial institution is recorded on the liabilities side of the balance sheet, either as a long-term or short-term loan, depending on the repayment period. Most often, a bank loan is classified as a long-term liability.<\/p>\r\n\r\n\r\n\r\n

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EXAMPLE<\/strong><\/span><\/p>\r\n