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Vinod Limited has 5,000, 11% Debentures which are to be redeemed within the 8 Months from the date of previous balance sheet. How will you show these debentures in the balance sheet?
- a)Long Term Borrowings
- b)Under Other Current Liabilities
- c)Short Term Borrowings
- d)Trade payables
Correct answer is option 'B'. Can you explain this answer?
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Verified Answer
Vinod Limited has 5,000, 11% Debentures which are to be redeemed withi...
When debentures become due for the redemption they are shown under the heading of Current Liabilities and sub heading Other Current Liabilities.
Most Upvoted Answer
Vinod Limited has 5,000, 11% Debentures which are to be redeemed withi...
Since,the period of redeeming the debenture is just 8 months.And as we know,that those liabilities that have the duration of payment is 12 months comes under the category of current liability. Here,also the period of reddening us just 8 months,so it will be shown under current liability.
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Vinod Limited has 5,000, 11% Debentures which are to be redeemed withi...
Explanation:
Under Other Current Liabilities
Debentures are considered as a form of long-term borrowing for a company. However, in this case, since the debentures are to be redeemed within 8 months from the date of the previous balance sheet, they are classified as a current liability.
Reason for classification:
- The key factor in determining the classification of debentures is the timeline for redemption. Since the debentures are due for redemption within a short period (less than a year), they are classified as a current liability.
- Other current liabilities typically include obligations that are due within a year, such as short-term loans, trade payables, and accrued expenses.
- By categorizing the debentures under other current liabilities, it provides a clear picture of the company's short-term financial obligations that need to be settled within the next accounting period.
Therefore, in the balance sheet of Vinod Limited, the 5,000, 11% Debentures should be shown under the category of Other Current Liabilities to accurately reflect the company's financial position and obligations.
Under Other Current Liabilities
Debentures are considered as a form of long-term borrowing for a company. However, in this case, since the debentures are to be redeemed within 8 months from the date of the previous balance sheet, they are classified as a current liability.
Reason for classification:
- The key factor in determining the classification of debentures is the timeline for redemption. Since the debentures are due for redemption within a short period (less than a year), they are classified as a current liability.
- Other current liabilities typically include obligations that are due within a year, such as short-term loans, trade payables, and accrued expenses.
- By categorizing the debentures under other current liabilities, it provides a clear picture of the company's short-term financial obligations that need to be settled within the next accounting period.
Therefore, in the balance sheet of Vinod Limited, the 5,000, 11% Debentures should be shown under the category of Other Current Liabilities to accurately reflect the company's financial position and obligations.
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Vinod Limited has 5,000, 11% Debentures which are to be redeemed within the 8 Months from the date of previous balance sheet. How will you show these debentures in the balance sheet?a)Long Term Borrowingsb)Under Other Current Liabilitiesc)Short Term Borrowingsd)Trade payablesCorrect answer is option 'B'. Can you explain this answer?
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