Where will Debentures be shown which are redeemable after 9 years from the date of issue?
Answer & explanation
Correct answer: option 1
The correct answer is option 1- Long term Borrowings.
Total borrowings are categorised into long-term borrowings, short-term borrowings and current maturities to long-term debt.
(i) Loans which are repayable in more than twelve months/operating cycle are classified as long-term borrowings on the face of balance sheet.
(ii) Loans repayable on demand or whose original tenure is not more than twelve months/operating cycle are classified as short-term borrowings on the face of balance sheet.
Thus, debentures which are redeemable after 9 years is long term borrowing.