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CA Intermediate · Advanced Accounting · Financial Statements of Companies

Under Schedule III (Division I), Tapti Engineering Ltd. has a term loan of Rs. 10,00,000 repayable in equal annual instalments over 5 years, with the first instalment falling due within 12 months of the balance sheet date and no default so far. How should it be presented?

Rs. 2,00,000 due within twelve months is shown as current maturities of long-term debt under current liabilities, and the remaining Rs. 8,00,000 stays under long-term borrowings, because Schedule III requires the current portion of long-term debt to be classified as current.

  1. ARs. 2,00,000 as current maturities of long-term debt under current liabilities and Rs. 8,00,000 as long-term borrowingsCorrect
  2. BEntire Rs. 10,00,000 as long-term borrowings
  3. CEntire Rs. 10,00,000 as short-term borrowings
  4. DRs. 2,00,000 as long-term provisions and Rs. 8,00,000 as long-term borrowings

Explanation

Equal instalments over 5 years give Rs. 2,00,000 per year. The portion payable within 12 months is current maturity of long-term debt, shown under other current liabilities; the balance Rs. 8,00,000 stays in long-term borrowings. Showing all as long-term ignores the current portion.

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