This discussion clarifies how to account for the outstanding balance of a vehicle bought on an Equated Monthly Instalment (EMI) basis within a company's financial statements. It addresses whether the remaining amount should be classified under 'Other Payables' as a current liability or 'Long Term Borrowings' as a non-current liability on the balance sheet. The example provided illustrates the calculation and placement of the balance after down payment and initial instalments.
28 July 2024
For example, I purchased a vehicle worth Rs.50,00,000 by paying a downpayment of Rs10,00,000. The balance is EMI of Rs.55,000 per month (principal only). Two installments are paid as on 31.03.2024. Where should the balance amount of Rs.38,90,00 be shown in my balance sheet. Under which head- Other payables under other current liabilities or Long term borrowings under Non current liabilities.