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Correct Treatment of Current Portion of Long Term Debt

JAWAD Ahmed's Profile

Dear All, I need some suggestion about Correct Treatment of Current Portion of Long Term Debt. My client acquired Demand Finance of Rupees 20,000,000/- PKR (Twenty Million only) from a Bank for three year. I make their projection how Company Payback their Long Term Loan. Company will payback Principal in three Installment. 1st Installment of Rs 7.00M after 1yr 2nd Installment of Rs 7.00M after 2 yr 3rd Installment of Rs 6.00M after 3yr. When he submitted these projection in Bank They argue that "The balance sheets of the projections are not depicting the two long term debts correctly". Could you Please Suggest me what is wrong in these projection. Picture attached in the following link: https://photos.app.goo.gl/uFQ5KUhByzQU0Mxj1

Answers

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

You have basically overstated your TOTAL liabilities by the amount of payments 7M, 7M and 6M which you have also (but correctly) reported in current liabilities portion.

If you have reported the planned payments in short term liabilities, then they should be deducted from the Long Term Liability amount.

Long term liabilities should be
2017 = 13 M
2018 - 6 M
2019 - 0

Having said that, your Balance SHeet should not have balanced. And if they did, there is something wrong elsewhere.

JAWAD Ahmed
Title: Finance Executive
Company: KODON
(Finance Executive, KODON) |

Thank You Sir for your suggestion.

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