In general, a debt is an amount or sum of a money that you are supposed to pay back to the person you have borrowed from.
When we run a business, the owner will not have money or treasures readily available to pay for some immediate transactions. The owner will put all his earnings in Investments, properties and deposits.
In such cases the owner will borrow money to meet his short term and long term requirements.
The Short term debts are usually loans taken from bank or other financial institution which are to be paid back in six weeks or a month.
Some of the short term debts are short term loans, Wages, Lease Payments and Income tax payments.
Similarly the long term debts are also loans which are take from financial institutions and they will be paid back in 12 months or more.
Some of the long term debts are bonds, convertible bonds, Lease obligations or contracts, Pensions and so on.
In terms of balance sheet both long term and short term debt are categorized into the Current Liabilities.
When we run a business, the owner will not have money or treasures readily available to pay for some immediate transactions. The owner will put all his earnings in Investments, properties and deposits.
In such cases the owner will borrow money to meet his short term and long term requirements.
The Short term debts are usually loans taken from bank or other financial institution which are to be paid back in six weeks or a month.
Some of the short term debts are short term loans, Wages, Lease Payments and Income tax payments.
Similarly the long term debts are also loans which are take from financial institutions and they will be paid back in 12 months or more.
Some of the long term debts are bonds, convertible bonds, Lease obligations or contracts, Pensions and so on.
In terms of balance sheet both long term and short term debt are categorized into the Current Liabilities.
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