Long-Term Liabilities

These are the liabilities which are not to be paid within one year of the balance sheet date or normal operating cycle if it is longer. Long-term liabilities may be classified as secured loans or unsecured loans in the balance sheet. When a business obtains a loan against the security of a specific asset it is secured or mortgage loan. If the payment is not made to the creditor(s) in time in accordance with the terms of mortgage the creditor can sell the asset to satisfy his claim from the proceeds of sale and any deficit is paid to and surplus received from him. Unsecured long-term liabilities do not have any asset attached to it as security.

The distinction between a marketable security (i.e., current asset) and an investment is purely based on time factor, investments in shares, debentures, bonds or even term deposits that will be retained for more than one year or one operating cycle appear under this classification. Also such items as land held for future expansion and not now being used in the business operations would be shown here.

For more help in Long-Term Liabilities click the button below to submit your homework assignment