Loans and Borrowings - Current
Also called: Overdraft, Short-term Loan
Bank overdraft, working capital loans and loan instalments due within twelve months, on the Balance Sheet.
In detail
This ledger carries borrowings repayable within twelve months: a bank overdraft, a short working-capital loan from a bank or cooperative, and the instalments of a term loan that fall due in the coming year. An overdraft drawn is credited here and debited to the bank account; repayments reverse it. Interest is never mixed in; it goes to Interest Expense. Because an overdraft limit can be drawn and repaid many times in a month, reconcile this ledger with the bank's loan statement at each month end. If the current portion of a long-term loan is not moved here at Ashadh end, the Balance Sheet understates what must be paid soon.
Formula
Closing balance = Opening + Drawdowns + Current portion moved from non-current - Principal repaid
Accounting entry
| Account | Debit | Credit |
|---|---|---|
| Bank Account | Rs 5,00,000 | |
| Loans and Borrowings - Current | Rs 5,00,000 |
How to record it in BRAccount
- 01Go to Invoicing > Journal Entry > New dated the drawdown date.
- 02Debit the bank account and credit Loans and Borrowings - Current for the amount drawn.
- 03Submit. The entry below posts.
- 04For repayment, use Invoicing > Journal Entry: Dr Loans and Borrowings - Current for principal, Dr Interest Expense, Cr Bank.
- 05Match the rows to the bank statement with Banking > Bank Reconciliation Tool each month.
When to use it
Post by Payment Entry when an overdraft is drawn, or by Journal Entry when reclassifying the coming year's instalments from the Non-Current account.
Example from the demo books
Dr Bank Account Rs 5,00,000, Cr Loans and Borrowings - Current Rs 5,00,000 for an overdraft drawn to pay Dashain salaries.