Question

Assertion (A): Non-current Liabilities are the liabilities which are not Current Liabilities.

Reason (R): Liabilities are of two types, i.e., Non-current Liabilities and 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 correct because Schedule III of the Companies Act, 2013 formally defines a non-current liability as any obligation that is not a current liability. The Reason (R) is also correct and explains why this definition works: since corporate financial frameworks divide all liabilities into exactly two categories (Current and Non-current), any debt that fails to meet the criteria of a “Current Liability” automatically becomes a “Non-current Liability” by default.