Question

Assertion (A): Interest accrued but not due and interest accrued and due are shown as Other Current Liabilities.

Reason (R): Since both interest accrued but not due and interest accrued and due are payable within 12 months from the date of Balance Sheet, they are shown as Other Current Liabilities.

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

Options

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

Explanation:

The Assertion (A) is true because both types of accrued interest are placed under the sub-head “Other Current Liabilities” in a corporate balance sheet. The Reason (R) is also true and directly explains why they are placed there: Because both amounts are short-term debts that must be paid out within 12 months, they perfectly satisfy the legal definition of a current liability.