When you enter a loan or other funding into the Financing part of the forecast, you will see it automatically represented in three locations: in the profit and loss (P&L) statement, in the balance sheet, and in the cash flow statement. All of the statements show the total of all loans and obligations you entered; there aren’t specific line items for each loan or payment.
In the profit and loss statement
The profit and loss statement will only display the interest that you pay on your loans, because the interest is the only portion of the loan payment that is expensable charge, meaning it will affect your net profit. The payments you make against the principal do not affect your net profit. Your total interest can be seen in the line item for Interest Expense. The interest you pay on your outstanding debt in each month will amount to an annual total at the end of the first fiscal year.
Because interest is calculated as a percentage of the outstanding debt for a loan or funding item, any increases in debt for that item will raise the interest expense, and any payments made against the debt will reduce the interest expense.
If you have entered several loans into the forecast, and they have different interest rates, then LivePlan will automatically calculate the total of these individual interest expenses. That total is the number you'll see in the Interest Expense line of the Profit & Loss statement. There aren't specific line items for each loan's interest.
In the balance sheet
On the Short-Term Debt line of the balance sheet, you will see the current cumulative total of your short-term debt. Any new loans you enter into the forecast will increase this total. Any monthly payments you make on the principal will decrease the total.
The amounts shown in the short-term debt line are financing that is scheduled to be paid back within the current 12-month period. For an explanation, read What is the difference between short-term debt and long-term debt?
On the Long-Term Debt line of the balance sheet, you will see the current cumulative total of your long-term debt. Any new loans you add to the forecast will increase this total, and any monthly payments you make on the principal will decrease the total.
The amounts shown in the long-term debt line are financing that is scheduled to be paid back after the current 12-month period. If you enter a loan in your forecast that has terms of more than 12 months, LivePlan will automatically divide it into short-term and long-term amounts.
Interest payments on these debts are not factored into the balance sheet. Instead, interest payments are shown in the profit and loss statement's Interest Expense line item.
In the cash flow statement
The Change in Short-Term Debt line in the cash flow statement shows the cash coming in from any loans or other funding you've received during that period, minus payments you've made. Short-term debt is the portion of financing that will be paid back within the current 12 months. For more on this subject, read What is the difference between short-term and long-term debt?
The Change in Long-Term Debt line in the cash flow statement shows the cash coming in from any loans or other funding you've received during that period, minus any payments you've made. Long-term debt is the portion of financing that will be paid back after the current 12-month period.
These two debt lines relate to the differences you would see in your balance sheet from period to period, representing debts and funding being received or paid back. An important difference, however, is that on the balance sheet, you see cumulative totals. On the cash flow statement, however, you'll see changes - as in, the amount of debt that has been added to (or removed from) the company in a particular month or year.
Interest being paid on the debt is not included on the cash flow statement, since it is already factored into your profit and loss statement.
The example above shows you how the changes in short-term and long-term debt are reflected in the cash flow statement. To keep things simple, we'll assume all the loans shown here have 0% interest.
- In the first month, we add a short-term loan of $12,000. This loan will be paid back within 12 months, so it appears as a change in short-term debt only.
- In the second month, we add a new loan: $20,000 that will be paid back in 20 months. LivePlan has converted $11,000 of this loan to short-term debt, since this is the portion that will be paid back in the first 12 months. The remaining $8000 is now long-term debt. So why does that only equal $19,000, if the original loan was $20,000? That's because you have also made a payment on the previous month's short-term loan, and that $1,000 has been subtracted from your short-term debt. That represents a change of ($1,000), which, when added to your new $20,000 loan, becomes $19,000.
- In the third month, we add another loan of $5,000, to be paid back in 12 months. So this is new short-term debt. But it's appearing as an addition of only $4,000 in the cash flow. Why? Because we've also made two new loan payments: one on the Month 1 loan, and one of the Month 2 loan. In this example, each of those payments is $1,000. So this amount is subtracted from both the short-term debt and the long-term debt. Since there was no new long-term debt in Month 3, the payment appears as a change of ($1,000).
As a reminder, these are not cumulative totals, which is why the line is labeled Change in Long-Term Debt. It is simply reflecting the addition (via new funding received) or subtraction (via payments) of debts in your forecast from period to period.
The totals in the example above are changes in the debt burden from month to month, but if you look at the cash flow table statement with annual detail, you will also see the total amount of debt that has been added in that fiscal year, compared to the previous fiscal year.