Premium on redemption is a liability for a company payable in the future. It is a provision and is shown under the head non-current liabilities under the sub-head ___________ until debentures are redeemed.
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Long-term Borrowing
Premium on redemption is the extra amount, over and above the face value, that a company promises to pay its debenture holders when it redeems (repays) the debentures. The promise is made when the debentures are issued, but the money goes out only on redemption, so till then it is a liability payable in future.
This liability comes from the debentures and is settled together with them, so it is shown along with the debentures: under the head Non-current liabilities, sub-head Long-term Borrowings, until the debentures are redeemed.
Why the other options are incorrect
Option (1) Long term provisions — Incorrect. The question calls the premium a provision, which makes this sub-head look right at first. But the sub-head Long-term provisions is for items such as provision for employee benefits; the premium is owed to the debenture holders, so it sits with the debentures under Long-term Borrowings.
Option (2) Accrued Income — Incorrect. Accrued income is income earned but not yet received. It is an asset, not a liability, so it can never be a sub-head of non-current liabilities.
Option (3) Outstanding Expense — Incorrect. An outstanding expense is an expense already due but not yet paid, such as last month's rent. It is paid within the year and is shown under current liabilities, not under non-current liabilities.
NCERT (2026-27 edition): |