Set Up Loan Ledgers So Current Maturities Aren't a March Scramble

At the year-end of a typical small company the loans look like this. There is one "Bank Loan" ledger holding a term loan, a car loan and part of the cash credit. Every EMI was posted in full against it. Nobody has the bank's repayment schedule, and the balance agrees to no lender statement. The auditor then needs the current maturities, the security, the repayment terms and the CARO answers by Friday. None of this is hard if the loan ledgers in Tally are set up properly when each loan is sanctioned. This is the set-up we would give a client's accountant, with a worked EMI loan whose numbers reconcile. The Schedule III format itself is covered in current maturities of long-term borrowings under Schedule III. This article is about getting the books ready to fill it in. Law as at 2 November 2026; figures are illustrative.

One ledger per loan account

Tally gives three predefined groups under Loans (Liability). Tally's help describes Loans (Liability) as the group for long-term loans taken by the company:

Under these groups, open one ledger for each loan account, named so that anyone can match it to a lender statement without asking: Term Loan, ABC Bank, A/c 1234 (machinery), Vehicle Loan, XYZ Finance, A/c 5678 (Innova), CC, ABC Bank, A/c 9012, Loan from Director, R. Mehta. When a lender gives a second loan, open a second ledger. Two loans from the same bank usually have different rates, security and repayment terms, and Schedule III wants those terms for each loan. For more on naming, see naming Tally ledgers for audit.

Two more ledgers go with every term loan: Interest on Term Loan, ABC Bank (an expense under Indirect Expenses) and Interest accrued but not due, ABC Bank (under Current Liabilities). On the day of sanction, put the sanction letter and the repayment schedule in a shared folder. You will need both at year-end.

Book every EMI as principal and interest

An EMI is not a repayment of the loan. Each instalment is part interest and part principal, and the bank's repayment schedule (also called the amortisation schedule) shows the split. Book each EMI from that schedule:

A common shortcut is to post the full EMI to the loan ledger and leave the interest for a year-end entry. The loan balance is then understated all year, the interest entry is a guess, and the balance never agrees to the bank. Check the bank's loan statement each quarter: floating rates and re-scheduled EMIs show up only there.

Worked example. Example Pvt Ltd takes a machinery term loan of ₹20,00,000 from ABC Bank on 5 October 2025, at 10% a year, repayable in 36 EMIs of ₹64,534 on the 5th of each month from 5 November 2025. Interest is worked monthly on the opening balance at 10%/12, rounded to the rupee, and the last EMI absorbs the rounding. Here is the bank's schedule for the first year:

The five EMIs total ₹3,22,670 (5 × ₹64,534), which is ₹2,43,358 principal plus ₹79,312 interest. If each EMI was split this way, the loan ledger at 31 March 2026 is ₹17,56,642. That is ₹20,00,000 less ₹2,43,358, and it is the figure on the bank's statement.

Interest accrued but not due, and processing fees

Interest accrued but not due. The EMI of 5 April 2026 includes interest of ₹14,639 for 6 March to 5 April. Of those 31 days, 26 fall in FY 2025-26, so about ₹12,278 (₹14,639 × 26/31) is this year's cost. Pass the entry at 31 March: Dr Interest on Term Loan ₹12,278, Cr Interest accrued but not due, ABC Bank ₹12,278. Reverse it on 1 April, or set it against the April EMI. Interest on this loan for the year is ₹91,590 (₹79,312 + ₹12,278). The accrual is not a borrowing. It goes in other current liabilities, and the linked article explains why.

Processing fees. Suppose the bank deducted a processing fee of ₹20,000 plus GST at sanction. Book it as a separate entry, never netted against the loan disbursed. The loan ledger must start at the full ₹20,00,000 sanctioned and disbursed, or it will never agree to the schedule. Take GST credit where it is eligible. ICAI's Guidance Note on Division I lists loan processing charges under other borrowing costs within finance costs. AS 16 includes the "amortisation of ancillary costs incurred in connection with the arrangement of borrowings" in borrowing costs. In practice, small companies either expense the fee or spread it over the loan term. Pick one policy and apply it to every loan. If the loan finances a qualifying asset under AS 16 (one that necessarily takes a substantial period, ordinarily twelve months or more, to get ready for use), the interest and the fee for the period until the asset is ready are capitalised. Otherwise, interest on the term loan and the fee both go to finance costs. See finance costs under Schedule III.

Vehicle loans, cash credit and director loans

• Vehicle loans. Record the vehicle in fixed assets at its full cost, and the loan in its own ledger under Secured Loans at the amount financed. Do not book the car "net of loan" or in the dealer's ledger. NBFC and finance-company loans are term loans from other parties in Schedule III. Treat vehicle loan EMIs the same way as the term loan above. The lender's hypothecation is a charge, so check whether it has been registered with the Registrar. Schedule III asks for details of charges or satisfactions not registered within the statutory period.
• Cash credit and overdraft. Put them under Bank OD A/c, one ledger per account, and reconcile each with its bank statement every month, like a current account. They are repayable on demand, so they are short-term borrowings even when renewed every year. A CC account that is in debit at 31 March is a bank balance, not a negative borrowing.
• Director loans. Use one ledger per director (and per relative), under Unsecured Loans or a sub-group "Loans from Directors". Keep the director's written declaration, given at the time the money is lent, that it is not out of borrowed funds. Rule 2(1)(c)(viii) of the Companies (Acceptance of Deposits) Rules, 2014 needs this declaration to keep the amount out of "deposits". In a private company the same applies to money from a relative of a director, and the amounts accepted must be disclosed in the Board's report. Write the repayment terms down. Without terms, a lender who can call the money at any time makes it current. If interest is payable, Tally's interest calculation can work it out (F11 → Enable Interest Calculation, then Activate interest calculation in the ledger). See ledgers for directors and relatives.

At year-end: current maturities from the repayment schedule

Since 1 April 2021 (G.S.R. 207(E)), Schedule III Division I says "current maturities of Long term borrowings shall be disclosed separately" under short-term borrowings, not under other current liabilities. For our loan at 31 March 2026:

The common slip is to take 12 × EMI (₹7,74,408) as the current maturity. That overstates current liabilities by ₹1,47,446, which is next year's interest and not a liability today. It also understates the current ratio.

Leave the Tally ledger as it is. The split is a presentation entry in the accounts, worked from a one-page year-end loan schedule. The schedule has one row per loan ledger, with these columns: lender and account number, sanction amount and date, rate, EMI and number of instalments left, the balance per Tally and per the lender's statement, the current and non-current portions, the interest accrued, the security, any guarantors, and any amount overdue at 31 March with how long it has been overdue. Attach the bank's repayment schedule and year-end statement to it. That one page covers every Schedule III particular: the secured and unsecured split, the nature of security, guarantees by directors or others, the terms of repayment, and the period and amount of any continuing default.

Quarterly stock statements must agree with the books

If a CC limit is secured on stock and book debts, the bank asks for a stock statement every quarter (sometimes every month). Schedule III requires companies with bank or FI borrowings secured on current assets to disclose whether the quarterly returns agree with the books. If they do not, the company gives a summary of the reconciliation and the reasons for material discrepancies. This disclosure has no size threshold. Separately, where CARO applies, paragraph 3(ii)(b) asks the auditor to report on the same point. It applies if working capital limits above ₹5 crore in aggregate were sanctioned at any time during the year on the security of current assets.

The fix is a routine. Prepare each statement from Tally's closing stock and debtors as at the quarter-end date, keep a copy as filed, and reconcile any difference that quarter rather than in March:

Four reconciliations like this, one per quarter, are the note. Statements made from rough figures leave nothing to reconcile.

Defaults and CARO 3(ix): keep the evidence as you go

If an EMI or interest payment was overdue at 31 March, Schedule III asks for the period and amount of the default. Where CARO applies, paragraph 3(ix)(a) asks whether the company defaulted on loans or interest to any lender, with the period and amount in the format the Order prescribes. Clauses 3(ix)(b) to (d) ask whether the company is a declared wilful defaulter, whether term loans were applied for their purpose, and whether short-term funds were used for long-term purposes. The loan ledgers answer these questions if each disbursement can be traced to its use (machinery loan to the machinery invoice), and if overdue EMIs and penal interest show up as entries rather than being netted later. Keep the lender's demand and overdue notices in the loan folder. For how auditors commonly mis-answer these clauses, see CARO 2020 clauses that are easy to get wrong.

The year-end loan checklist for the accountant:

• One ledger per loan account; every balance agrees to the lender's 31 March statement.
• All EMIs split from the repayment schedule; no EMI posted whole to the loan ledger.
• Interest accrued but not due booked; processing fees booked gross under one consistent policy.
• Loan schedule prepared, with current maturities equal to the principal of the next 12 EMIs.
• Security, guarantees, rate and repayment terms noted for each loan; charges checked as registered.
• Four quarterly stock statements filed and reconciled to the books.
• Director declarations and loan terms on file; any overdue amount at 31 March listed with dates.

Frequently asked questions

Sources

• Schedule III amendment: G.S.R. 207(E), 24 March 2021 (Note F(v) current maturities; additional regulatory information on quarterly returns, wilful defaulter and charges)
• ICAI: Guidance Note on Division I, Non Ind AS Schedule III (Revised January 2022), para 9.5.5 (finance costs)
• ICAI: Guidance Note on CARO 2020 (Revised 2022), paragraphs 3(ii)(b) and 3(ix)
• AS 16 Borrowing Costs, paragraph 4 (ICAI accounting standards)
• Companies (Acceptance of Deposits) Rules, 2014, rule 2(1)(c)(viii), as amended by G.S.R. 695(E), 15 September 2015
• Tally Solutions: TallyPrime Help, Chart of Accounts (Loans (Liability), Secured Loans, Unsecured Loans, Bank OD A/c)
• Tally Solutions: TallyPrime Help, Interest Calculation

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