VCE Accounting Unit 3. Video of this presentation can be found on my YouTube channel here https://www.youtube.com/channel/UCf5jyuJoYwie8tWfvjEc0zg.

1. 2.4
CLASSIFYING LOANS

2. Video of this presentation at…
YouTube Channel for VCE Accounting

3. © Michael Allison. Author’s permission required for external use.
 Mortgages vs. Loans
2.4 CLASSIFYING LOANS
Money
borrowed for…
Mortgage Loan

4. © Michael Allison. Author’s permission required for external use.
 Loans are classified based on the amount that:
 is due within the next 12 months
 is due beyond the next 12 months
 E.g. a business owes $10,000 repayable over the next 5 years
2.4 CLASSIFYING LOANS
Year 1 Year 2 Year 3 Year 4 Year 5
$2,000 $2,000$2,000 $2,000 $2,000
Current
$2,000
Non-Current
$8,000

5. © Michael Allison. Author’s permission required for external use.
2.4 CLASSIFYING LOANS
Instalment loan
• The firm makes scheduled repayments of the principal of the loan throughout the life
of the loan.
• Business XYZ borrows $10,000 repayable over 5 years
Year 1 Year 2 Year 3 Year 4 Year 5
$2,000 $2,000$2,000 $2,000 $2,000
Balance Sheet Year 1 Year 2 Year 3 Year 4 Year 5
Current Liability
Non-Current Liability
Balance Sheet Year 1 Year 2 Year 3 Year 4 Year 5
Current Liability 2,000
Non-Current Liability 8,000
Balance Sheet Year 1 Year 2 Year 3 Year 4 Year 5
Current Liability 2,000 2,000
Non-Current Liability 8,000 6,000
Balance Sheet Year 1 Year 2 Year 3 Year 4 Year 5
Current Liability 2,000 2,000 2,000
Non-Current Liability 8,000 6,000 4,000
Balance Sheet Year 1 Year 2 Year 3 Year 4 Year 5
Current Liability 2,000 2,000 2,000 2,000
Non-Current Liability 8,000 6,000 4,000 2,000
Balance Sheet Year 1 Year 2 Year 3 Year 4 Year 5
Current Liability 2,000 2,000 2,000 2,000 2,000
Non-Current Liability 8,000 6,000 4,000 2,000 0

6. © Michael Allison. Author’s permission required for external use.
2.4 CLASSIFYING LOANS
Interest-only loan
• The principal of the loan is not repaid until the end of the loan period, e.g. 5 years.
• Only the interest is due during the life of the loan.
• Business XYZ borrows $10,000 on an interest-only loan repayable after 5 years
Year 1 Year 2 Year 3 Year 4 Year 5
$0 $10,000$0 $0 $0
Balance Sheet Year 1 Year 2 Year 3 Year 4 Year 5
Current Liability
Non-Current Liability
Balance Sheet Year 1 Year 2 Year 3 Year 4 Year 5
Current Liability 0
Non-Current Liability 10,000
Balance Sheet Year 1 Year 2 Year 3 Year 4 Year 5
Current Liability 0 0
Non-Current Liability 10,000 10,000
Balance Sheet Year 1 Year 2 Year 3 Year 4 Year 5
Current Liability 0 0 0
Non-Current Liability 10,000 10,000 10,000
Balance Sheet Year 1 Year 2 Year 3 Year 4 Year 5
Current Liability 0 0 0 0
Non-Current Liability 10,000 10,000 10,000 10,000
Balance Sheet Year 1 Year 2 Year 3 Year 4 Year 5
Current Liability 0 0 0 0 10,000
Non-Current Liability 10,000 10,000 10,000 10,000 0

7. © Michael Allison. Author’s permission required for external use.
TASK
In-class Homework
SQ11 X
Ex2.2 X
Ex2.3 X