If the maturity period of a loan is 18 months, it is classified as _______ in the balance sheet.
Question
If the maturity period of a loan is 18 months, it is classified as _______ in the balance sheet.
Solution
The loan would be classified as a "Current Liability" in the balance sheet. Here's the step by step explanation:
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In accounting, liabilities are classified into two categories: Current Liabilities and Non-Current Liabilities.
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Current Liabilities are obligations that are due within a short-term period, typically within a year.
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Non-Current Liabilities, on the other hand, are obligations that are due over a longer period, typically more than a year.
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Since the maturity period of the loan in question is 18 months, which is less than 2 years, it falls under the category of Current Liabilities.
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Therefore, on the balance sheet, this loan would be classified under Current Liabilities.
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