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Current Portion of Long Term Debt and the Cash Flow Statement

Hello everyone,

There’s a concept that is confusing me and I would like to ask you through an example:

If a company took out a $100 loan for which to plans to pay it through four $25 payments over the next four years, I am having trouble with the accounting and here is why:

In 2018, the Long term debt goes up by $100 and this is reflected in the cash flow statement as an increase in the cash flow from financing section by $100.

In 2019, the long term debt portion goes down by $25 so the long term debt shows “75” but the current portion of long term debt goes up by “25” so on the cash flow statement I have $25 as cash inflow in (liability increased so its a cash inflow) and I have $25 going down in the cash fow from financing ($25 principal paydown), and therefore it appears that the company did not spend any cash during the year.

Why is the current portion of long term debt account so confusing with respect to the cash flow statement?

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Hi,
in 2018 the initial booking is as follows: The long-term (LT) debt goes up by $75 and the the current-portion of LT-debt (due within one year) goes up by $25.
The classification between LT-debt and the current portion of LT-debt is not a cash inflow, it’s just a split of the total/remaining debt in two different balance sheet accounts. What you miss in your example above is the down payment of the debt out of the cash.
Best,
Oscar

Thank you so much! I used that as my initial journal entry and it worked