Question

Classify the following items under major heads and subheads (if any) in the Balance Sheet of the company as per Schedule III, Part I of the Companies Act, 2013:

(a) Interest Accrued on Investments

(b) Calls-in-Advance

(c) Mortgage Loans

Hint:

Decide asset or liability, then current or non-current. Accrued interest is a current asset, calls-in-advance a current liability and a mortgage loan a long-term borrowing.

Answer 1

Step 1: Know the rule for classification:
Schedule III, Part I, gives the Balance Sheet of a company in two halves: Equity and Liabilities, and Assets. Each item goes under a major head and then a sub-head. An item is current if it is due or realised within 12 months. Otherwise it is non-current.

Step 2: Interest accrued on investments:
Interest has been earned on investments but is not yet received. It is an amount to come in, so it is an asset. It will be received within the year, so it is a current asset. The sub-head is Other Current Assets.
Major head: Current Assets. Sub-head: Other Current Assets.

Step 3: Calls-in-advance:
A shareholder has paid money before the company has called for it. The company owes this money back or adjusts it later, so it is a liability. It is adjusted when the call is made, so it is a current liability.
Major head: Current Liabilities. Sub-head: Other Current Liabilities.

Step 4: Mortgage loans:
A mortgage loan is a loan taken against security of property and repayable after a long period. It is a borrowing, so it is a liability. It is not due within 12 months, so it is non-current.
Major head: Non-Current Liabilities. Sub-head: Long-term Borrowings.

Step 5: Show the classification together:

Item	Major head	Sub-head
(a) Interest Accrued on Investments	Current Assets	Other Current Assets
(b) Calls-in-Advance	Current Liabilities	Other Current Liabilities
(c) Mortgage Loans	Non-Current Liabilities	Long-term Borrowings

Final Answer:
(a) Current Assets - Other Current Assets; (b) Current Liabilities - Other Current Liabilities; (c) Non-Current Liabilities - Long-term Borrowings.