Question : Assertion (A): Debentures and long-term loans from banks and other financial institutions are included in the total long-term debt.
Reason (R): Equity share capital, Preference share capital, Reserves, and Surplus are all included in the shareholders' money.
Option 1: Both (A) and (R) are true and (R) is the correct explanation of (A)
Option 2: Both (A) and (R) are true and (R) is not the correct explanation of A
Option 3: (A) is true, but (R) is false
Option 4: (A) is false, but (R) is true
Correct Answer: Both (A) and (R) are true and (R) is not the correct explanation of A
Solution :
Long-term debt is defined as debt that a firm incurs that becomes due or is payable more than a year from the balance sheet date and is displayed as a non-current liability on the liabilities side of the balance sheet of the company.
Debentures and long-term loans from banks and other financial institutions are included in the total long-term debt.
Equity share capital, Preference share capital, Reserves, and Surplus are all included in the shareholders' money.
Hence option 2 is the correct answer.
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