 In this presentation, we're going to take a look at an adjusting entry related to breaking out the short-term and long-term portion of a loan balance. Time to rise above the crowd with Sage50Cloud, accounting. Here we are in our Get Great Guitars file. We're going to go on over to our reports first, so we're going to go to the reports dropdown. Take a look at those financial statement reports. We want to look first at the balance sheets. Let's open up the balance sheet reports. We're looking at the cutoff date being the end of February, so we're going to pick the month of February and say, okay, so then up top we have our report for the balance sheet. Now we're going to be looking at the liability accounts down here, so we're going to the liability accounts. We have a couple different loan balances. We've got these two loan balances. We're thinking about the cutoff dates now in terms of getting the financial statements correct as of the cutoff date, as of the cutoff date of February 29th, so these are the adjusting entries that are going to get things right as of that point in time. With regards to the loans, typically when we process the loans or show the loans, oftentimes we want to group the loans together into one short-term account and one long-term account. In other words, what we currently have are two different loans. We've got two different loans on the books. We put them both into a current account. We haven't broken out between short-term and long-term because that's going to be easier for us to tie out to the amortization table as we have done for this loan, which is the one we're going to be concentrating on. That 69, 878 then ties out to the 69, 878 on the amortization table. However, there's a short-term portion and a long-term portion to it, so we not only need to do that for reporting purposes, we also need to break out the long-term portion. That's what we're going to do here. We're going to break that out. This second loan is all short-term, so it could remain in the short-term portion, however, you may want to group the short-term loans together into one basically loan or short-term loan amount, and you could do that by doing an adjusting journal entry or you could use some kind of report formatting to group them together as you make your reports that you're going to be providing externally. We're going to be focusing in here. If I go to the amortization table, like we say, if we went to the amortization table, we have it set up so that we can tie out to the balance of the loan at a particular point in time, this being the end of February, that's what the loan balance is as of the end of February. However, there's a short-term portion. We know this particular loan, we make loan payments of about this is rounded 1359 each time. You would think the short-term portion, and remember for accounts payable, the short-term portion means it's going to be something that's going to be paid within the next 12 months, a year's time period. You would think then that the short-term portion would be this if I could just add up the loan payments or if I obviously just pulled out the trustee calculator here, or if I just calculated it right here, if I said that if it was 1359 times 12, then you would think that it would just be simply short-term portion 16308. That however is not the case. That's not correct. Why wouldn't that be correct? Well because part of this payment is going to be including interest. So the interest portion hasn't been incurred yet. If we were to record the interest portion as a liability, that would be similar to us saying, I know I have to pay rent next month and therefore I'm going to put it on the books as a liability right now. We don't put it on the books right now as a liability even though it's pretty much a sure thing that we're going to be paying rents next month because we haven't incurred it. We haven't used the office building in order to incur the expense of paying rent. Same thing is true with these interest portion of the loan. We are going to pay it but we haven't incurred it yet because we haven't used the money over that time period to incur the interest and therefore it wouldn't be right for us to put it on as a liability at this point in time. So I can't do that. We can't do that. What we need to do is take this amortization table and look at just the interest portion or the, I'm sorry, the principal portion. So I need to take 12 payments down of the principal portion. So here's one, two, three, four, five, six, seven, eight, nine, 10, 11, 12. So right there's going to be, I'm going to make this yellow. There's going to be our short term portion. And so notice that's a bit complex. You pretty much have to have an amortization table to be able to figure that out. And so we're going to say, all right, there's the short term portion. If I was to take that and say this is going to be the sum of these items is short term or let's put this up top. Let's put this up top. We'll say this is going to be equal to the sum of these items. That's going to be the short term. And that means that the long term is going to be the balance minus the short term portion. So this would be then, I'm going to say yellow for short term, short term, long term. And obviously this long term portion is where the balance would be after 12 payments. That's going to be equal to this balance. So this is what's on the books right now. We're going to break out the short term portion, which will leave us with the long term or we could think of this the other way. This is on the books right now. We're going to break out the long term portion, which will leave us with the short term portion here, which should be the 13109. So if we then go back to our balance sheets, I'm going to go back to the balance sheet. We're going to say, all right, what do we need to do here? I need a long term. I need to break out the long term portion here. So I'm going to break out the long term portion. I'm going to be decreasing this amount with a debit because it's a credit balance account. We'll debit this. The other side is going to go into a long term note payable. So long term liability of some kind. We'll do that with a journal entry. So we're going to say, all right, let's do this with a journal entry. Let's go back on over here. Let's go to the tasks. Now pretty much most of the time you would use journal entries for adjusting, you know, the adjusting journal entries at the end of the period. All the adjusting journal entries will be as of the end of the period. So it's going to be 229 is the adjusting journal entry. And we're going to be reducing this loan balance, which was, well, let's take a look at it. I'm going to select the dropdown. We're looking for the loan here that had the, let's see, is it this one? So let's check it. Let's check it. I'm going to go back on over. It's the one with the 5795. So the 5795, let's check it one more time. This one, that's the one. That one is going to go down. Now it's a credit balance account. So we're going to decrease it. And so I'm going to decrease it by the long term portion. So I'm going to decrease it by the 56770. So 56770, put that here, 56770. And I'm just going to call the description adjusting balance, a DJ balance. And that'll help us to recognize these journal entries that are going to be our adjusting journal entries. Now it needs to be going to the other side. This is going to be some type of long term liability. So we're looking liabilities, but I'm looking down here long term. So here's a long term debt non current. That looks good. Let's put it there. And then we're going to say that's going to be the 56770 as well. There's our transaction. Let's go ahead and post it and see if it does what we expected to do, which is to bring the short term balance down to that short term balance and then record this in the long term balance. So let's do that. And then we're going to say close this. And then I'm going to go back over to the balance sheet to see what happens with it, refresh it. If it doesn't do so automatically, mine is doing it automatically, which is great. And then what's left in the short term portion, 13108, 13108, that of course matches what's in the short term portion on our amortization table, which we looked up, which is nice. And then the long term portion is the 56770, 56770 that then tying out to the long term portion here and what would be left after the next 12, 12 payments. So that's, that's how we would break out the short term and long term. Once again, you may do more formatting as you generate the report to group these two together, which you could do as a journal entry or as part of your formatting of the report when you make reports for the external users. That's going to be it for now. Let's get out of here.