Conversion of long term liability into short term
This query is : Resolved
24 February 2016
I have seen that some organisations are classifying there liabilities into short term and long term on the basis of the EMI's/ installments payable within or after 12 months.
Lets say that if they have taken Term loan from XYZ bank , then the EMIs which are due for payment within 12 months to XYZ bank is classified as SHORT TERM BORROWINGS and rest EMI's are classified as LONG TERM Borrowing.
Is the accounting method adopted above is correct ?????
Lets say that if they have taken Term loan from XYZ bank , then the EMIs which are due for payment within 12 months to XYZ bank is classified as SHORT TERM BORROWINGS and rest EMI's are classified as LONG TERM Borrowing.
Is the accounting method adopted above is correct ?????
CA Subham Verma
(Expert)
24 February 2016
Yes this method of accounting is absolutely correct.
EMIs due within next 12 months are short term liabilities (current liabilities) and due after 12 months are long term liabilities (Term Liabilities)
EMIs due within next 12 months are short term liabilities (current liabilities) and due after 12 months are long term liabilities (Term Liabilities)
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