Long-term liabilities can be structured either with an equal principal payment or with an equal total payment.

Question

Quizplus · Accepted Answer

Long-term liabilities, such as loans, can be structured to have either an equal principal payment plan, where the principal amount paid is the same every period but the total payment decreases over time as interest decreases, or an equal total payment plan (amortization), where the total payment (principal plus interest) remains constant over the life of the loan, with the proportion of interest decreasing and the proportion of principal increasing over time.

Long-Term Liabilities Can Be Structured Either with an Equal Principal