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Let’s say that Notes Payable-Long Term has a balance of $400,000 and at year end $200,000 is due. Is there a journal entry to record that let’s say, mid year? Or am I supposed to separate it on the balance sheet and label that amount due as Notes Payable-Short Term.
Someone advised me to convert that portion to accounts payable because that portion now becomes a current liability. Is that proper accounting procedures?There is no journal entry needed.
However, the amount owing within 12 months will be shown on the SOFP as a current liability and the amount owing in more than 12 months will be shown as a non-current liability.
This is all explained in my free lectures. The lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
(By the way, we stopped calling it the balance sheet many years ago – it is called the Statement of Financial Position.)
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