S Ltd. took a loan from the bank for 10,00,000 to be settled within 5 years in 10 equal half yearly instalments with interest. The first instalment is due on 30.09.2021 of 1,00,000. Determine how the loan will be classified in preparation of Financial Statements of S Ltd. for the year ended 31st March 2021 according to Schedule III.

Solution

Short term borrowings 2,00,000; Long term borrowings 8,00,000 In the given case, instalments due on 30.09.2021 and 31.03.2022 will be shown under the head 'short term borrowings' as current maturities of loan from bank as per Schedule III. Therefore, in the balance sheet as on 31.3.2021, 8,00,000 (1,00,000 x 8 instalments) will be shown under the heading 'Long term Borrowings' and 2,00,000 (1,00,000 x 2 instalments) will be shown under the heading ' short term borrowings.'