Debt and capital are part of a liability group that is none other than part of the balance sheet. But we will not discuss capital, we will now discuss debt and its types. In accounting and everyday life debt is an important part. Not only that accounting debt also has an important part of a company. This happens because debt exists and continues to grow within a company.
Although almost all companies have debts, the amount of debt and what they are used for certainly also varies. The amount of debt usually arises because of many aspects such as the amount of money needed by a company for business development.
Characteristics of Debt
One of the problems that is often encountered in a company is the debt recovery system. This needs to be calculated well, if not calculated carefully it can certainly make the company’s finances unstable.
However, debt is not merely negative. If it can be managed well and has a clear purpose, it can certainly make the company develop into a better direction. Many large and small companies have debt to develop their businesses on various sides. If debt like this is used for productive needs, of course the existence of this debt makes the business run well. In the RI Law also regarding the capital market, debt is part of the securities. Securities that are securities such as for example:
- Commercial securities
- Unit for collective investment contract participation
- Unit for contract participation in securities
- Debt recognition
- Debt evidence and others
Types of Debt Based on Time Period
In general, according to the time of repayment, debt in accounting is divided into 3 types. The three types include:
Short Term Debt
As the name implies, this debt is a type of debt with a shorter term or one year deadline from the balance sheet date. The repayment can also be done through current assets owned by a company.
Short-term debt is also often said by the name of current debt. When will pay off debt is usually using a source that can cause new debt for companies such as examples:
Every transaction in and out of a company is usually taxed. If the company often makes sales, then the tax that must be paid must also be a lot. This must also be paid by the company and of course with a short time.
This debt also needs to be paid off so it won’t be a burden on the company from the start. This cost debt for example such as employee salary debt, employee reimbursement debt and other expense debt.
Companies engaged in the production sector usually require materials for their production processes. This debt is usually those who buy production materials which at the time of payment is not made directly at the time of purchase that is why it is called trade debt.
This debt is debt involving written evidence, usually the company also pays the debt with the time and capability agreed upon by both parties.
Medium Term Debt
Accounting actually only knows 2 types of debt, namely short-term debt and long-term debt. However, given the agreed repayment time by a company and creditors it is usually not during the long-term debt period. Then made a medium-term debt.
Generally this medium term debt has a repayment period of less than 10 years or up to 10 years.
Long Term Debt
The latter is long-term debt, debt that has the longest repayment period. This also applies to the amount of debt whose value is fairly large. The term of this debt is also usually more than 10 years and the payment is paid in stages.
Although paid in stages, the amount paid also includes interest and principal debt.
Because of that debt is not only owned by large companies, small and medium businesses (SMEs) also have a lot of debt. Especially for newly developing companies, of course they have debt to develop their business.
Remember, having a debt in the business you go through is not a mistake, only the thing to note is that financial management in your business is the most important thing. If the debt can be managed properly, then it will become a ‘vitamin’ for your company so that it can make your company grow.
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