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How should a mortgage loan payable be reported on a classified balance sheet?

First, let's make it clear that the amount in the account Mortgage Loan Payable should be the principal amount owed to the lender. Any interest that has accrued since the last payment should be reported as Interest Payable, a current liability. (Future interest is not reported on the balance sheet.)

Let's assume that a company has a mortgage loan payable of $238,000 and is required to make monthly payments of approximately $4,500 per month. Each of the monthly payments includes a $3,000 principal payment plus approximately $1,500 of interest. This means that during the next 12 months, the company will be required to repay $36,000 ($3,000 x 12 months) of principal. The required principal payments due within one year of the balance sheet date must be reported as a current liability. The remaining principal of $202,000 ($238,000 minus $36,000) will be reported as a long-term liability, since it is not due within one year of the balance sheet date.

You can find the amount of principal due within the next year by reviewing the loan amortization schedule for each loan or by asking your lender.