How to you treat a long term loan in a balance sheet? 10 points best answer!?

Candyfloss - 2008-04-25 02:13:46 - Homework Help

In a balance sheet, where would you put a long term loan?: 1) As part of equity/financed by OR 2) Subtract if from net assets Either way the account should balance where Assets = Liability + Equity Any help appreciated! Thanks

Best Answer:

A long term loan (that is, a loan that is repayable in more than 12 month's time) is shown in a balance sheet as a non-current liability. A long term loan is not equity. Equity is a contribution made by the owner. A loan is obtained from a bank or another source, such as, a friend. The accounting equation, in terms of taking out a $5,000 loan, would be: assets + $5,000 (cash at bank) = liabilities +$5,000 (loan) + equity (no change) .

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Answer:

purplemoon0101 - 2008-04-25 02:27:10

A long term loan should be put in the outgoings and subtracted from the assets. The interest on it should be put as a loss. If the loan is on Property which will eventually be an asset, the property is not an asset until it is completely paid for. Although if there is enough equity already in the property, then the equity is an asset. However, remember that the equity can fluctuate on a property with property values fluctuating. Hope this helps.

atlantisflicka - 2008-04-25 04:09:51

Long term loans get put into non current liablilites and as Your Net assets is Total assets - Total Liablilities your balance sheet will be correct

Kacey - 2008-04-25 04:41:45