Electricity security is Non Or Current assets

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Surinder (Querist)
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04 April 2023 Dear Sir

We have deposit Security to electricity department for electricity meter. Please suggest is this Non Current assets or Current Assets

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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04 April 2023 Even though it seems to be long term assets, but as per Ind AS standards, it remains under current assets.

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Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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04 April 2023 Non Current Asset.
Inference :- Schedule III of Companies Act,2013, Note-1 to General Instructions For Preparation of Balance Sheet.

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CA Sanat Pyne

CA Sanat Pyne (Expert)
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04 April 2023 The security deposit paid to the electricity department for an electricity meter would typically be classified as a current asset if it is expected to be refunded within one year. This is because current assets are defined as assets that are expected to be converted into cash or used up within one year.

However, if the security deposit is not expected to be refunded within one year, it would be classified as a non-current asset. Non-current assets are defined as assets that are expected to provide economic benefit to the company for more than one year.

Therefore, the classification of the security deposit as a current or non-current asset would depend on the expected time period for the refund of the deposit.
As per Schedule III of the Companies Act, 2013 and Note 1 to General Instructions for Preparation of Balance Sheet, security deposits are classified as non-current assets if they are expected to provide economic benefit to the company for more than 12 months from the reporting date. If the security deposit is expected to be refunded or realized within 12 months from the reporting date, it would be classified as a current asset.

Therefore, the classification of the security deposit paid to the electricity department for an electricity meter as a current or non-current asset would depend on the expected time period for the refund of the deposit as per the reporting date of the balance sheet.

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