If a portion of long-term debt is due within the next year and is to be paid from current assets, that portion is classified as a current liability. It is common for companies to have portions of long-term debt, such as notes or mortgages, due in the next year. No journal entry is necessary when this is the case. The total debt is simply reclassified or divided into two categories—short-term and long-term—when the company prepares its balance sheet and other financial statements.
A variety of long-term borrowing arrangements will be discussed in Chapter, “Noncurrent Liabilities,” but for the present, bear in mind that as time goes by long-term debts become short-term debts. For this reason, the current liabilities of many firms include the portion of long-term debt that matures within the coming year