Suvidha Ltd. was on the verge of expansion. It was requiring ₹40 lakhs for modernisation of its Machinery. It decided to issue Rs.30 lakhs, 7% debentures to public for cash and to borrow ₹10 lakhs from SBI Bank as long term loan, with a condition from SBI to issue ₹12 lakhs. 7% debentures as a subsidiary security besides the primary security, to which the company agreed. The face value of 7% debenture was ₹100.

Identify the amount that would be shown under the sub-head long term borrowings in the Balance Sheet of Suvidha Ltd.

₹40 Lacs

The correct answer is option 1- ₹40 Lacs.

To identify the amount that would be shown under the sub-head "long term borrowings" in the balance sheet of Suvidha Ltd., we need to sum up the total amount borrowed for long-term purposes.

Suvidha Ltd. planned to:

Issue Rs. 30 lakhs, 7% debentures to the public for cash.

Borrow Rs. 10 lakhs from SBI Bank as a long-term loan.

Additionally, as per the condition from SBI Bank, Suvidha Ltd. agreed to issue Rs. 12 lakhs, 7% debentures as a subsidiary security. But this will have no effect on balance sheet. It will be shown as notes only.

Total amount borrowed = Rs. 30 lakhs (debentures) + Rs. 10 lakhs (loan) 
                                  = Rs. 40 lakhs