Question

Assertion (A): Dividend Payable or Unpaid Dividend is a Short-term Provision and shown under the main head Current Liabilities.

Reason (R): Dividend Payable or Unpaid Dividend is not a provision but a liability and is shown under Other Non-current Liabilities.

In the context of the above two statements, which option is correct?

विकल्प

• Both Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation for Assertion (A).

• Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation for Assertion (A).

• Only Assertion (A) is correct.

• Both Assertion (A) and Reason (R) are not correct.

Answer 1

Both Assertion (A) and Reason (R) are not correct.

Explanation:

The Assertion (A) is incorrect because an unpaid dividend is a definitive legal debt, not a provision. Under Schedule III of the Companies Act, 2013, it must be shown under the sub-head “Other Current Liabilities”, not Short-term Provisions. The Reason (R) is also incorrect; while it correctly states that an unpaid dividend is a liability rather than a provision, it wrongly claims that it is classified under Other Non-current Liabilities. Because it is a short-term obligation that must be settled quickly, it belongs strictly under Current Liabilities.