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General Accounting Discussions: Current portion of long-term debt

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    • CommentAuthorkringli
    • CommentTimeOct 30th 2007
     
    Hi, I have just started a new accounting position for a manufacturing company. Before I issue the financial statements I need to determine the current portion of long-term debt. The company has a line of credit that has been ongoing and is also automatic in that when the checking account gets low the bank automatically makes a transfer and also automatically takes payments when there are sufficient funds. Management's viewpoint is that the entire LOC should be considered long-term debt. I can agree to a point in that there is not necessarily any portion of the principal due. In addition, because of this, how would I calculate current portion? Any insight on this would be extremely helpful!!

    Thanks!!
    • CommentAuthorneo
    • CommentTimeOct 30th 2007 edited
     
    Hi!

    First, determine the terms of the agreement. It is vital in determining the amount.

    The current portion of the debt is the amount the the firm is expecting to be settled within twelve months of the balance sheet date (normally).

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