What account 7810 is for
A company took a 3-year bank loan to buy equipment. This debt stays for more than a year, so it is not mixed up with "short-term" borrowings. A long-term loan goes to 7810. The part that falls due soon, meaning the amount payable within 12 months (para. 302), is moved to the current portion.
Account type
In the chart of accounts, 7810 has type P (liability) and belongs to group 7800 "Long-term loans and borrowings". The usual balance is a credit balance.
The group and its sub-accounts
Under paragraph 331, group 7800 has four accounts (for loans and borrowings in soums and in foreign currency with a term longer than 12 months):
| Account | What it records |
|---|---|
| 7810 "Long-term bank loans" | Loans received for a term longer than 12 months |
| 7820 "Long-term borrowings" | Borrowings from lenders other than banks for a term longer than 12 months (para. 333) |
| 7830 "Long-term bonds payable" | Funds raised through bonds with a repayment term over 12 months (para. 334) |
| 7840 "Long-term bills of exchange payable" | Bills issued, payable in more than a year (para. 335) |
What goes to the credit side
Under paragraph 332, the long-term loan received is shown on the credit of 7810 and the debit of the cash accounts. The rows of the table in paragraph 336:
- a loan is received: Dr 5110-5530, Cr 7810-7820 (row 1);
- inventories are accepted out of the loan: Dr 1010-2910, Cr 7810-7820 (row 2);
- an advance is paid out of the loan: Dr 4310-4330, 4410, 4510-4520, Cr 7810-7820 (row 3);
- a debt to a supplier is paid out of the loan: Dr 6010, Cr 7810-7820 (row 4).
What goes to the debit side
The amount moved to the current portion leaves 7810 and goes to 6950 "Long-term liabilities – current portion": 7810 is debited, 6950 is credited, and the long-term balance of the loan falls by that amount (para. 332). Paragraph 336, row 6: Dr 7810-7840, Cr 6950.
Analytical accounting
Under paragraph 332, analytical accounting for long-term loans is kept separately by type and term of the loans and by bank.
Where people go wrong
- Move the current portion on time. Do not forget to move the amount payable in the next 12 months to 6950: otherwise the short-term liabilities in the report look too small (practical tip).
- The boundary with 6810. A short-term loan is up to 12 months (para. 291), a long-term one is longer than 12 months (para. 331). Choose by the term in the loan agreement (practical tip).
- Keep each bank separate. If you have loans from several banks, the amount and term of each loan must sit on its own card (para. 332).
Main journal entries 5
Debit and credit are as in the model table of Appendix 2 to NAS No. 21. The transaction text briefly restates the table row.
| Transaction | Debit | Credit | Source |
|---|---|---|---|
| Long-term loans and borrowings received | 5110–5530 | 7810–7820 | NAS No. 21, para. 336, row 1 (in the table: 7810-7820) |
| Inventories received out of long-term loans and borrowings accepted | 1010–2910 | 7810–7820 | NAS No. 21, para. 336, row 2 (in the table: 7810-7820) |
| Advances paid out of long-term loans and borrowings | 4310–4330, 4410, 4510–4520 | 7810–7820 | NAS No. 21, para. 336, row 3 (in the table: 7810-7820) |
| Debt to suppliers and contractors paid out of long-term loans and borrowings | 6010 | 7810–7820 | NAS No. 21, para. 336, row 4 (in the table: 7810-7820) |
| Long-term loans, borrowings, bonds and bills of exchange moved to the current portion | 7810–7840 | 6950 | NAS No. 21, para. 336, row 6 (in the table: 7810-7840) |
Example
Chirchiq Pishloq LLC (a fictitious cheese producer) took a 3-year bank loan of 500,000,000 soums. A year later, the 150,000,000 soums of the loan payable in the next 12 months were moved to the current portion. The amounts are taken for illustration only:
| No. | Transaction | Dr | Cr | Amount, soums |
|---|---|---|---|---|
| 1 | The bank loan reached the settlement account | 5110 | 7810 | 500,000,000 |
| 2 | The loan's current portion transferred | 7810 | 6950 | 150,000,000 |
Source of the entries: 1 is para. 336, row 1; 2 is para. 336, row 6 (also para. 332).
Calculation:
| Item | Amount, soums |
|---|---|
| Credit turnover of 7810 (1) | 500,000,000 |
| Debit turnover of 7810 (2) | 150,000,000 |
| Credit balance of 7810 | 500,000,000 − 150,000,000 = 350,000,000 |
| Credit balance of 6950 (2) | 150,000,000 |
| Total debt on the loan | 350,000,000 + 150,000,000 = 500,000,000 |
The total debt has not changed: 500,000,000 soums. It is just that 150,000,000 soums of it no longer count as long-term and now appear as a current liability (example prepared by the author).