Long Term Loans

A: Long term loans are financial obligations of the company that are due for repayment after more than one year from the balance sheet date. They include long-term bank loans, bonds, and long-term shareholder loans.

A: Long term loans are measured at amortized cost using the effective interest rate method. Initial measurement includes the amount borrowed less any issuance costs or discounts.

A: The current portion of a loan is the portion due for repayment within one year from the balance sheet date and is classified as a current liability. The non-current portion is the remainder due after one year and is classified as a long-term liability.

A: A loan is recorded upon receipt with the entry: Dr. Bank Account (for the net amount received), Dr. Loan Discount (if any), Cr. Long Term Loans (for the face value of the loan).

A: When an installment is paid, the entry is: Dr. Long Term Loans (principal portion), Dr. Interest Expense (accrued interest), Cr. Bank Account (total installment paid).