How Should a Mortgage Payable Be Reported on a Classified Balance Sheet?

First to make everything clear, it should be stated that the amount in the account Mortgage Payable should be the principal amount owed to the lender. And any interest which has increased since the last payment should be notified as Interest Payable, a valid liability.

Now let’s assume that a company has $238,000 mortgage payable and it is needed approximately $4,500 payments per month. And $3,000 of this amount will be principal payment and the rest $1,500 will be interest. This means that throughout the term of 12 months the company will be have to repay $36,000 ($3,000 multiply 12 times) of principal. The principal payments due in one year of the balance sheet date will be reported as a valid liability. The rest principal of $202,000 ($238,000-$36,000) will be reported as a long-term liability because it is not due in one year of the balance sheet date.

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