Financial Statement Presentation

Your accountant graciously sends you a note on how the debt will be presented on your Statement of Financial Position. Take a look. It seems that any principal payments to be made in the next fiscal year are included as current liabilities. Non-current liabilities include the rest of the balance.

Where principal is not repaid until the end of the loan period, the presentation is relatively simple. The bank loan is categorized as non-current in 20X1 then moves to current in 20X2. It is fully paid before the year ended December 31, 20X3, so no balance exists in that year.

Daisy Ltd.
Statement of Financial Position (Partial)
As at 31 December of Each Year
(20X1, 20X2, 20X3)

On the income statement, interest expense will be recorded in the section other income/expense; gains and losses:

Blended interest-principal is a bit trickier because loan principal is being paid over the loan period. Here is what your accountant expects to see on your financial statements for the years ended December 31, 20X1 to 20X3 for the blended-interest principal loan. You can refer to the amortization schedule for loan amounts owing at the end of each year. In 20X1, part of the loan is current and part is non-current. We will therefore introduce the line item current portion of long-term loan payable. No journal entry is required for this re-categorization. It only affects the financial statements, not the accounting system.

Daisy Ltd.
Statement of Financial Position (Partial)
As at 31 December of Each Year
(20X1, 20X2, 20X3)

20X1:

• Current portion = $8,201 + $8,447;
• Non-current portion = $34,308 – $16,648

20X2:

• Current portion = $8,700 + $8,960;
• Non-current portion = $0 because loan will be fully paid in 20X3

20X3:

• Loan was fully repaid at end of 20X3, so no loan outstanding

On the income statement, interest expense will be recorded in the section other income/expense; gains and losses:

Remember our other examples? Let’s look at Good Eats Inc. first. I’ll do this one, then you work through Cleo’s Swimwear and Mindful Media.

Good Eats Inc.
Statement of Financial Position (Partial)
As at 31 December of Each Year
(20X1, 20X2)

On the income statement, interest expense will be recorded in the section other income/expense; gains and losses:

Good Eats Inc.
Statement of Financial Position (Partial)
As at 31 December of Each Year
(20X1, 20X2)

On the income statement, interest expense will be recorded in the section other income/expense; gains and losses:

Here’s one for you.

Great work! Now try Mindful Media. You’ve got this!

That’s it for financial statement presentation. You’re doing great!