Glossary · Also called Bank loan
Long-term loan
Money borrowed that is repaid over more than a year.
What it means
Borrowing repayable more than twelve months after the reporting date, shown as a non-current liability.
Example
A RM80,000 loan repayable over four years is a long-term loan.
Why it matters
It funds larger, longer-term spending and appears among non-current liabilities.
In practice
A long-term loan appears in the statement of financial position under non-current liabilities, because settlement falls due after more than twelve months. When the cash arrives, the bank account is debited and the loan account is credited. Interest charged each period is a separate expense in the income statement. It is not part of the loan balance.
Imagine a business borrows RM60,000 repayable over five years. The RM60,000 shows as a non-current liability. The part repayable within the coming year, perhaps RM12,000, is reclassified as a current liability.
Students often confuse a long-term loan with a bank overdraft. Both are borrowing. An overdraft is repayable on demand, so it sits among current liabilities. A long-term loan has a fixed, extended repayment schedule. Keeping them apart matters for judging whether a business can meet its short-term debts, because only the current portion strains near-term cash.
If you are unsure how to split a loan across the two headings, one of our teachers can show you with exam-style figures. Book a trial class.
Related terms
Definitions here are general accounting explanations for study. For your board's exact wording, see its official syllabus via Sources.
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