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CA Intermediate · Advanced Accounting · Financial Statements of Companies

Kaveri Textiles Ltd. has a 9% term loan of ₹40,00,000 from a bank, repayable in 4 equal annual instalments of ₹10,00,000 starting 15 months after the balance sheet date (31 March 2027). Which of the following correctly shows the classification of this loan in the Balance Sheet as at 31 March 2027 under Schedule III (Division I)?

The whole ₹40,00,000 is shown as long-term borrowings, because the first instalment is due 15 months after the balance sheet date, so nothing is payable within twelve months and there is no current maturity of long-term debt to be separated.

  1. AEntire ₹40,00,000 as long-term borrowingsCorrect
  2. B₹10,00,000 as current maturities of long-term debt under other current liabilities and ₹30,00,000 as long-term borrowings
  3. CEntire ₹40,00,000 as short-term borrowings
  4. D₹10,00,000 as long-term borrowings and ₹30,00,000 as short-term borrowings

Explanation

The first instalment falls due 15 months after the balance sheet date, i.e. beyond 12 months. No part of the loan is payable within 12 months, so no current maturity exists. The whole ₹40,00,000 is a long-term borrowing. Option 2 wrongly assumes a current maturity.

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