Question

Loans which are repayable within ________ months, are called as short-term borrowings.

Hint:

Current Assets and Current Liabilities are always defined by the "12 months or operating cycle, whichever is longer" rule.

Answer 1

Step 1: Understanding the Concept:
In accounting, liabilities are classified as current or non-current based on their expected time of settlement. This helps in assessing the short-term liquidity of the business.

Step 2: Detailed Explanation:
According to standard accounting principles (like Schedule III of the Companies Act, 2013 in India), a liability is classified as current if it is due to be settled within twelve months after the reporting date, or within the company's normal operating cycle. Borrowings that meet this criterion are specifically termed as short-term borrowings. Loans extending beyond this period are long-term borrowings.

Step 3: Final Answer:
Loans repayable within Twelve months are called short-term borrowings.