How should convertible note financing be handled on the balance sheet?

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Kruze Consulting Startup Q&A Author
Vanessa Kruze Founder, CPA

A convertible note should be classified as a Long Term Liability that then converts to Equity as stipulated from the contract (usually a new fundraising round). I’ve attached a screenshot of what this looks like.

Assuming that there’s a $3,027,000 note with $181,620 in total accrued interest….

Conceptually, how the figures break out (not what you really what to present, but for presentation sake):

Balance sheet liabilities equity

And in practice, showing that interest is accrued monthly and a “Net” Series A:

Balance sheet liabilities equity Series A

Hope this helps!!

**Note that SAFE notes are Equity right from the start

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