Long Term Loans and Advances
The revised Schedule requires loans and advances to be presented separately on the face of the balance sheet as 'long-term' and 'short-term' loans and advances. Considering the format of the revised Schedule, it appears that even though the terms used are 'long-term' and 'short-term', these would correspond to non-current and current loans and advances.
With respect to long-term loans and advances, the revised Schedule specifies the following further classification in the notes :
- Capital advances : This is a new category. It is clear that capital advances would not be shown under capital work in progress. Capital advances should be treated as non-current assets, on receipt of fixed asset the amount of advance gets transferred.
- Security deposits.
- Loans and advances to related parties (giving details thereof)- Since the terms used in the revised Schedule have meanings assigned to them in respective accounting standards, reference should be made to AS 18 for identifying the related parties.
- Other loans and advances (nature to be specified). It includes loans and advances recoverable in cash or kind which are not expected to be realized in 12 months of operating cycle whichever is longer.
The present requirements regarding sub-classification as secured or unsecured, considered good or doubtful, and allowance for bad and doubtful debts continue in the revised Schedule also. Loans and advances due from directors/ other officers/ firms or private companies in which any director is partner/ director/ member are still to be disclosed separately.
However, the present requirements regarding disclosure of the following have been done away with :
- maximum amount due from directors or other officers during the year, and
- dues from companies under the same management.
Some argue that capital advances/security deposits given to related parties should not be included under 'loans and advances to related parties'. However, their disclosure may still be required in the notes as per the requirements of AS 18.
