If I have a loan that I will finish repaying over the next 5 months (original tenure is 5 years so I've paid 55 monthly repayments already), if I'm constructing a financial statement today, does this fall under current liability or a short term debt?

Total loan = $100K Interest rate = 2% Monthly repayment = $1753

a. Under Balance Sheet, will this loan fall under current liabilities or non-current liabilities? Assuming it falls under current liabilities, then will the amount be = $1753 * 5months = $8765?

b. Under Cash flow statement, the cash outflow for the accounting year = $1753 * 5months = $8765?

c. Since Net Worth = Assets - Liabilities, when a liability (aka loan) has been fully repaid, how does it affect the numbers?

Similarly, in a situation where the remaining loan repayment has 15 months left instead, how will this affect things?

a. under Balance sheet, will this fall under non-current liabilities where the amount = $1753 * 15?

b. Under cash flow statement, the cash outflow for the accounting year will be $1753 * 12?Is that right?

Appreciate your advise please. Thank you!


The loan would be a current (< 1 year) liability. The balance of the account would be the amount of principal left on the loan, not the total of the payments remaining (so something slightly less than $8765

Same for the 15 month loan, though it will be listed under long-term debt.

The cash flow statement would list all cash outflows, so the total of 5 (15) monthly payments.

When a loan is repaid, assets are decreased (the cash for the payment) and liabilities are decreased (the amount the loan drops), which decreases net worth by the amount of the interest portion, which would be listed in an Interest Expense account.

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