Current or non-current?

Every item in the balance sheet is either current or non-current. An item is current if it is used in the operating cycle, is due within 12 months, is held for trading, or is cash. Everything else is non-current.

• Inventories and cash are always current (loose tools are inventory).
• Fixed assets (property, plant and equipment, intangible assets) are always non-current.
• Investments and receivables are split by the 12-month test.
• Borrowings: long-term if repayable after 12 months; short-term if repayable on demand or within 12 months. The part of a long-term loan due within 12 months is a current maturity, under other current liabilities, as is interest accrued on borrowings.

Items that are not shown as assets any more:

• Preliminary expenses and discount on issue are written off in the year they arise: from securities premium first, then from the statement of profit and loss.

Proposed dividend is not a liability until the shareholders approve it, so it is shown only in the notes. Contingent liabilities (which may or may not arise, like a disputed claim) are shown in the notes too.

Example: securities premium 30,000, preliminary expenses 10,000, and a profit and loss credit balance of 60,000. Write off 10,000 from the premium, leaving 20,000; reserves and surplus = 20,000 + 60,000 = 80,000.