Long-term Borrowings

Businesses borrow money from third parties such as banks and finance companies to run their businesses. In return, businesses are charged an __________ on the loan taken.

Any amounts borrowed for more than one financial year are known as __________.

The portion of principal sum that is to be repaid within the next financial year is considered as the __________ of long-term borrowings.

When a loan is obtained, we debit __________ and credit __________.

• Cash at bank ; Trade payables

• Cash at bank ; Loan

• Trade receivables ; Sales revenue

• Loan ; Cash at bank

When a loan is repaid, we debit __________ and credit __________.

• Cash at bank ; Trade payables

• Cash at bank ; Loan

• Trade receivables ; Sales revenue

• Loan ; Cash at bank

Long-term borrowings are classified as a __________ in the statement of financial position.

The current portion of long-term borrowings is classified as __________ in the statement of financial position.

According to the __________ theory, the interest expense incurred must be matched against the income earned from using the loan to operate the business in the asme accounting period to determine the profit for that period.

Interest expense incurred but not yet paid is known as interest expense payable. According to the __________, interest expense must be recognised in the financial period once incurred whether or not it has been paid.

Interest expense payable is is to be recognised as a __________.