A Level Accounting (9706)•9706/13/M/J/21
Explanation
Classifying bank loan portions in the statement of financial position
Steps:
- Calculate annual installment: 150,000 / 5 = 30,000.
- Identify current portion: First installment due within 12 months from 31 December 2020, so 30,000 is current liability.
- Identify non-current portion: Remaining 120,000 repayable after 12 months.
- Debentures are fully non-current (due 2028); equity is not a liability.
Why B is correct:
- B shows current liability of 30,000 and non-current of 120,000, per IAS 1: liabilities due within 12 months are current.
Why the others are wrong:
- A: Treats entire loan as non-current, ignoring the portion due within 12 months.
- C: Classifies whole loan as current, but most is repayable beyond 12 months.
- D: Incorrectly reverses current and non-current portions.
Final answer: B
Topic: Preparation of financial statements
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