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Question
Assertion (A): Proposed Dividend for current year is shown under ‘Other Current Liabilities’.
Reason (R): Unclaimed Dividend is shown under ‘Other Current Liabilities’.
In the context of the above two statements, which of the following is correct?
Options
Both (A) and (R) are true, but (R) is not the correct explanation of (A).
Both (A) and (R) are true and (R) is the correct explanation of (A).
Both (A) and (R) are false.
(A) is false, but (R) is true.
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Solution
(A) is false, but (R) is true.
Explanation:
Proposed Dividend for the current year is not shown under ‘Other Current Liabilities’; instead, it is disclosed in the Notes to Accounts as a contingent liability since it is yet to be approved by shareholders. Therefore, the assertion (A) is false. However, Unclaimed Dividend is correctly classified under ‘Other Current Liabilities’ because it is a liability to be paid to shareholders who have not yet claimed their dividend. Hence, (R) is true and (A) is false.
