when a company issues debt with a maturity of more than one year the accounting becomes more complex at issuance a company debits assets and credits long term debt as a company pays back its long term debt some of its obligations will be due within one year and some will be due in more than a year close tracking of these debt payments is required to ensure that short term debt liabilities and long term debt liabilities on a single long term debt instrument are separated and accounted for properly to account for these debts companies simply notate the payment obligations within one year for a long term debt instrument as short term liabilities and the remaining payments as long term liabilities 
in general on the balance sheet any cash inflows related to a long term debt instrument will be reported as a debit to cash assets and a credit to the debt instrument when a company receives the full principal for a long term debt instrument it is reported as a debit to cash and a credit to a long term debt instrument as a company pays back the debt its short term obligations will be notated each year with a debit to liabilities and a credit to assets after a company has repaid all of its long term debt instrument obligations the balance sheet will reflect a canceling of the principal and liability expenses for the total amount of interest required business debt efficiencyinterest payments on debt capital carry over to the income statement in the interest and tax section interest is a third expense component that affects a company s bottom line net income it is reported on the income statement after accounting for direct costs and indirect costs debt expenses differ from depreciation expenses which are usually scheduled with consideration for the matching principle the third section of the income statement including interest and tax deductions can be an important view for analyzing the debt capital efficiency of a business interest on debt is a business expense that lowers a company s net taxable income but also reduces the income achieved on the bottom line and can reduce a company s ability to pay its liabilities overall debt capital expense efficiency on the income statement is often analyzed by comparing gross profit margin operating profit margin and net profit margin in addition to income statement expense analysis debt expense efficiency is also analyzed by observing several solvency ratios these ratios can include the debt ratio debt to assets debt to equity and more companies typically strive to maintain average solvency ratio levels equal to or below industry standards high solvency ratios can mean a company is funding too much of its business with debt and therefore is at risk of cash flow or insolvency problems issuer solvency is an important factor in analyzing long term debt default risks investing in long term debtcompanies and investors have a variety of considerations when both issuing and investing in long term debt for investors long term debt is classified as simply debt that matures in more than one year there are a variety of long term investments an investor can choose from three of the most basic are u s treasuries municipal bonds and corporate bonds governments including the u s treasury issue several short term and long term debt securities the u s treasury issues long term treasury securities with maturities of two years three years five years seven years 10 years 20 years and 30 years municipal bonds are debt security instruments issued by government agencies to fund infrastructure projects municipal bonds are typically considered to be one of the debt market s lowest risk bond investments with just slightly higher risk than treasuries government agencies can issue short term or long term debt for public investment corporate bonds have higher default risks than treasuries and municipals like governments and municipalities corporations receive ratings from rating agencies that provide transparency about their risks rating agencies focus heavily on solvency ratios when analyzing and providing entity ratings corporate bonds are a common type of long term debt investment corporations can issue debt with varying maturities all corporate bonds with maturities greater than one year are considered long term debt investments 