Current liabilities does not include:
Current liabilities does not include:
Solution
✅ Correct Option: 4
Understanding Current Liabilities
Current liabilities are obligations that a business expects to settle within one year or the operating cycle, whichever is longer.
Analysis of Each Option
Option 1: Short term borrowing
- Loans or borrowings repayable within one year
- These ARE current liabilities
- Example: Bank overdraft, short-term loans
Option 2: Trade payables
- Amounts owed to suppliers for credit purchases
- Payment due within short period (usually 30-90 days)
- These ARE current liabilities
Option 3: Short term provision
- Provisions expected to be settled within one year
- These ARE current liabilities
- Examples: Provision for warranty, provision for expenses
Option 4: Deferred tax liabilities
- Tax liabilities payable in future years
- Arise due to timing differences between book profit and taxable profit
- These are classified as non-current liabilities
- Not expected to be settled within one year
Conclusion
Deferred tax liabilities represent tax obligations that will be paid in future periods beyond one year. Since current liabilities only include obligations due within one year, deferred tax liabilities are excluded from current liabilities and shown under non-current liabilities in the Balance Sheet.
Answer: Option 4 is correct ✓
Related questions:
2022: 16 July Shift 2
2022: 20 July Shift 1