Accounting All-in-One For Dummies

Chapter 6

Planning for Long-Term Obligations

In This Chapter

Discovering how a company raises cash

Identifying long-term liabilities

Accounting for notes payable

Reporting gain or loss on debt extinguishment

Considering bonds

If you own a car or house you financed, you're probably all too familiar with long-term debt: loans that won't be paid off by the end of the next 12-month period. Well, companies have long-term debt, too. A company usually uses current debt as a vehicle to meet short-term obligations like payroll and incurs long-term debt to finance company assets.

This chapter gives you the lowdown on two types of long-term debt: notes and bonds payable. Notes payable are debt a company takes on typically through lending institutions, such as banks, to finance asset purchases. Asset purchases include cars, equipment, and buildings. Bonds payable are typically issued by hospitals and municipalities to fund expansion (although corporations can issue them too). Here you find out ...