Long and Short-Term Debt

When it comes to accounting processes, there can be a lot more to know and understand. However, a very small mistake or error can have big consequences. That is the reason why it is very important to understand what liabilities are. It is because they play the most important role in your business. Almost every business will have liabilities at some point in its lifespan. The important thing to remember is that liabilities are any current debt your business owes. They are settled over time via the transfer of economic benefits like money, goods, or services. Usually, you would get an invoice from a vendor to pay off any debts. Remember that any money that you owe is considered a liability or debt. It would stay as a liability until you pay off your invoice. There are two primary business liabilities classifications, including long and short-term debt. In this article, you will get information about short-term debt. In addition to this, you will also get knowledge about long-term debt. And you can contact the best debt relief company for debt relief.

Short-Term Debt:

It is also known as current liabilities. Generally, they are any debts or obligations you must pay off within the next 12 months. It is essential to keep a deep eye on your short-term debt. It will help you ensure you have enough liquidity from your current assets. It also provides help to guarantee that your business can meet any debts or obligations. To better understand short-term debt, here is a list of a few most common examples.

Interest Payable:

Companies, like individuals, often utilize credit to buy goods and services to finance quickly. It represents the interest on short-term credit purchases to be paid. It is anything that you are making monthly payments on. It will include loans, mortgages, or long-term debts.

Accrued Expenses:

These are usually the expenses you have already incurred and want to account for but will only pay next month. Simply put, it is the total amount of accrued income employees have earned but have yet to receive. The reason is that some companies pay their employees every two weeks. 

Debts of Discounted Operations:

It is an outstanding debt that most people glance over but should scrutinize more closely. Companies want to account for the financial impact of an operation, division, or entity that is currently being held for sale or has been recently sold. It also includes the financial impact of a product line. 

Long-Term Debt:

They can also be referred to as non-current debt. In addition, long-term debts are any obligations or debts your business has incurred that are due over a year. The business will take long-term debt to get new capital, buy capital assets or invest in new capital projects. However most businesses ask about short-term debt, but some prefer this type of debt. It is because they play a major role in your business’s long-term financing and solvency. The most common examples of long-term debt are: 

Deferred Tax debt:

They are any taxes that require to get paid by your business but are not due for more than a year. Remember that anything due within the year should get recorded as a current liability.

Long-Term Notes Payable:

They are just like accounts payable. The major difference is that there is a promise to pay. Anything Such as a loan agreement with payment terms outlined beyond the 12 months would be notes payable.


Most small business owners will incur various types of liabilities when they operate. As you continue to grow, you will likely take on more debts as you go. Therefore, it is very important to understand short-term and long-term debt. Furthermore, make sure that they get recorded properly on your balance sheet.