Payable shows the amount of interest the lender on
company property. While it shows the magnitude
of the interests of capital
owners on company
property. The equation is also reflected in the balance sheet includes assets,
liabilities and capital.
The existence of debt
on the balance sheet shows the company never used
yan draw resources from creditors. This
chapter discussed the accounting
for the activities to funding from
creditors. Debt is
defined as the sacrifice of future economic benefits
that are probable
arising from present
obligations of an
entity to give up assets or provide
services to other
entities in the future as a
result of past transactions or events.
From the above definition can be
stretched a few important things,
namely:
- The debt
arising from past transactions or
events.
- Debt must
involve the transfer of assets or the
provision of services that are probable in the future (almost certainly).
- This debt
is a liability of an entity.
CLASSIFICATION OF DEBT
For reporting
purposes, the debt is classified
as current liabilities and long term debt.
A loan that comes from operating activities
will be classified as current liabilities if
the debt to be settled by using current assets in the next year or
within the normal
operating cycle, whichever is longer.
But debt from
bank loans, or other loans are classified according
to the criteria of one year.
A debt due within
one year from the balance sheet date
are classified as current liabilities.
MEASUREMENT OF DEBT
Measurement is
the process of attribute value on the debt.
Attribute value assigned to the debt is a monetary value. But it turned out to be
smooth classification of debt
and non-current debt into consideration in
the measurement. In general, the
debt will be measured at the present value of the debt which is the amount
of money that must
be paid to pay it off now.
This rule is more
appropriate for non-current
debt. Meanwhile borrowings
resulting from operations such as payroll and
accounts payable debt, this debt will generally be repaid so
that the difference between the
maturity value and the present value
of debt is not material. Therefore borrowings resulting from operations generally
for practical purposes
stated at maturity value.
For measurement
purposes, both current
and non-current debt can be classified into three types, namely:
- Amount of debt
that's for sure. This is an example of
nominal debt of the notes or bonds.
- Amount of debt
that must be estimated. Seen from certainty,
this debt must
happen but the amount is not
known with certainty. Debt
guarantee an example.
- Debt conditional
(contingent liablility) is a debt that would arise
in the event of another incident. For example companies sued in
court by another company. Companies will be obliged to pay the money if the
court is demanding the company won.
The possibility of conditional
debt level can be
divided into:
- Probable: probability
is very high level and can even be said to be almost certain. If the debt amount can be
estimated reliably, then the
debt is recorded,
if the amount is difficult to
estimate the existence of
this debt are
disclosed in the notes to the financial statements.
- Reasonable posible:
The possibility of a 50% or may happen
or may not. If so fairly disclosed in
the notes to the financial statements.
- Remote: The
possibility is very small
so it does not need to be recorded and reported except for collateral loan
repayment obligation despite the possibility of a small degree but
must be disclosed in the notes to the financial statements.
ACCOUNTING FOR SHORT
TERM LOAN
As discussed in the
section above, short-term
debt does not need to be discounted to present value. This is debt that includes Accounts
Payable (Accounts Payable), as
well as a variety of operational
debt such as debt salaries, electricity, telephone,
taxes and so
forth. Meanwhile, notes payable,
although the short-term is generally presented at sekarangnya.
Short-term loans
Companies sometimes
issue a promissory
note or a written promise to pay money at a certain
date. Judging from the presence or absence of the interest rate to be paid, noters
can be divided into flowering notes payable and notes payable is
not flowering. Interest-bearing
notes payable is a
publication notes payable in addition to having to pay bills also have to
pay a nominal interest.
Current debt
that will be
replaced with the Long-Term Debt
A current debt
can be refinanced as sometimes created new
bonds as the
repayment of debt at maturity
later. The new Notes
will mature over a year. Given these actions, the company will not pay the debt within
a year's time that will come. Under these conditions would be more appropriate if the debt is not
classified as short-term
debt. However, there are conditions that must be met:
1. Management
intends merefinance debt into long term
debt.
2. Management
must be able to demonstrate
the ability of the debt merefinance proven to:
refinace implementation occurred in the period after the balance sheet date but before financial statements are issued, achieve a
strong agreement that clearly
that allows refinance
with long-term basis.
Line of
Credit
Sometimes the
company entered into an agreement with the bank. Bank
will provide a
loan to the company from time to
time require. Because of this agreement has been approved by the company
at the time of withdrawing funds from the bank, the
company does not need to go
through a long process. Influence
on accounting is:
When the line
of credit was signed, the company has not recorded any debt, If the
company withdraw money
from the bank, when
the company recorded
debt (current or
tidk smoothly depending
on the debt at
maturity).
LOANS PAYABLE ACCOUNTING
Long-term debt is
debt maturities exceeding
one year from the balance sheet date.
This debt can be
supported by the issuance of
promissory notes and debt is called long-term
notes payable. Long-term debt can also be supported
by a certificate issued
bonds, commonly called letters. Because the accounting for
short-term notes payable in the accounting
is essentially the same as long-term notes payable, then the following will be discussed only bonds. Accounting
for bonds is
comprised of current bond issuance, when the
payment of interest and amortization
of premium or discount as well as repayment.
