Current or Non-current? Classifying Loans, Deposits and Advances under Schedule III

Scope: Companies applying Schedule III Division I; other divisions and non-corporate guidance require separate assessment. Verification date: 11 October 2026.

Start with the substance of the balance

A ledger called “security deposit” may be recoverable next month or only after a five-year lease. A “long-term loan” may contain instalments payable during the next twelve months. Classifying the full ledger from its name can therefore distort the balance sheet, liquidity ratios and the reader's understanding of obligations.

Schedule III's classification framework considers the normal operating cycle and specified current-asset/current-liability criteria, including twelve-month timing. Where the operating cycle cannot be identified, the prescribed assumption is twelve months. Apply the relevant tests to the actual balance and contractual rights at the reporting date.

Prepare a classification working before grouping

Use one row for each balance or component. Record the counterparty, nature, gross amount, contractual due date, expected realisation or settlement, restriction on use and supporting document. For a loan, obtain the repayment schedule and identify principal separately from interest.

Record the proposed financial-statement head as a second decision. “Current” does not itself mean “trade receivable”, and “non-current” does not itself mean “investment”. A supplier advance, refundable deposit and loan are different balances even if they are all recoverable within one year.

A worked year-end example

Assume a manufacturing company reports at 31 March 2026 and has a normal twelve-month operating cycle. It has ₹30 lakh of term-loan principal outstanding. The lender's schedule shows ₹6 lakh payable by 31 March 2027 and ₹24 lakh after that date. Subject to the complete classification assessment, the working identifies ₹6 lakh as current maturities and ₹24 lakh as the remaining non-current portion.

These are illustrative facts, not automatic outcomes. A callable loan, a breach of terms, a renewed lease or a restriction on cash may change the analysis. Obtain the relevant documents and apply the reporting framework before finalising the split.

Keep timing and recoverability separate

A deposit expected to be recovered within twelve months can still be doubtful. Conversely, a fully recoverable deposit may be non-current. First determine recognition and recoverability; then determine classification. Moving a doubtful balance into a current heading does not resolve an impairment issue.

Review advances for whether goods or services have already been received. An advance may need to become an expense, inventory or an asset rather than remain an advance indefinitely. Ask for settlement evidence after year-end, while keeping the reporting-date facts clear.

Common mistakes and final checks

• Using the original loan tenure rather than the remaining repayment dates.
• Copying last year's classification without checking new agreements.
• Putting all deposits into one head regardless of recovery timing.
• Using current classification to conceal unresolved recoverability.
• Changing the balance sheet while leaving the borrowing note unchanged.

When preparing financials in assureOffice or another Schedule 3 financial builder, review suggested mappings against this working. Check that the current/non-current split appears consistently in the balance sheet and notes. Retain a short explanation for material judgement calls so next year's preparer can understand the decision rather than merely copy it.

Document judgement for unusual balances

A deposit described as “refundable” may still need a careful timing assessment. Obtain the agreement, expected settlement date and relevant conditions. If management expects recovery soon but the contractual terms suggest otherwise, document the facts and applicable classification conclusion rather than relying on an optimistic label.

Review changes from the comparative year. An instalment entering the next twelve months may require a current portion even if the underlying loan arrangement has not changed. Conversely, reclassification alone does not establish a new loan or cash movement. Keep the timing bridge consistent with the borrowing and deposit schedules.

Related articles

• Schedule III Ratios: Calculations, Supporting Workings and Common Errors
• Trial Balance Tallies, but Financial Statements Do Not: How to Find the Difference
• assureOffice Financials: Checks after Import and before Export

Sources and references

• Schedule III, Companies Act, 2013 — India Code
• ICAI Guidance Note on Division I — Non Ind AS Schedule III