Read the following passage and answer the following question.
ABC Ltd. took over Assets of ₹6,00,000 and Liabilities of ₹40,000 of XYZ Ltd. at an agreed value of ₹6,30,000. ABC Ltd. issued 10% Debentures of ₹100 each at a discount of 10% to XYZ Ltd. in full satisfaction of the purchase price. ABC Ltd. writes off any capital losses incurred during a year, at the end of that financial year.
Under which main head 'debenture' is shown in the company's balance sheet?
Answer & explanation
Correct answer: option 1
The correct answer is option 1- Non current liabilities.
Debenture is shown under subhead long term borrowing and main head non current liabilities.
NON-CURRENT LIABILITIES shall include the liabilities due after one year. It shall include the following:
- Long-term Borrowings: Such as Debentures, Loan from Bank, Loan from other parties.
- Deferred Tax Liabilities.
- Other Long term Liabilities: Such as Premium Payable on Redemption of Debentures; Premium Payable on Redemption of Preference Shares, Public Deposits (Unless specified, it will be assumed that deposits are for more than one year.)
- Long-term Provisions: Such as Provision for Employee Benefits, Provision for Provident Fund, Provision for Warranties.