Money received against share warrants is shown as:

Question

Accepted Answer

The correct option is 1:
Money received against share warrants is correctly presented under the major head **Shareholders' Funds** on the liability side of the company's Balance Sheet. A share warrant is a financial instrument that gives the holder the right, but not the obligation, to subscribe for shares of the company at a predetermined price, typically within a specified time frame. The amount received by the company for issuing these warrants is considered a part of the owners' equity because it represents an advance receipt of capital or premium, which will eventually be converted into share capital upon exercise. In accordance with the provisions of Schedule III of the Companies Act, 2013, this amount is shown separately as a reserve component within the 'Shareholders' Funds,' reflecting the company's commitment to issue equity in the future.

The incorrect option is 2:
**Long term provisions** are amounts set aside out of profits to meet future obligations or losses that are expected to occur after twelve months or the normal operating cycle, where the exact timing or amount cannot be accurately determined. Examples include a provision for employee benefits like gratuity or a long-term warranty provision. Money received against a share warrant does not represent a past or present liability; instead, it signifies a future commitment to issue shares, which is why it is fundamentally different from a provision.

The incorrect option is 3:
**Other long term liabilities** primarily encompass obligations that are not current but must be settled with an external party through an outflow of economic benefits, such as long-term customer advances, deposits, or other non-financial obligations. Money from share warrants is not a repayable debt or a traditional external obligation. The warrant holder's claim is an equity claim, not a debt claim, which removes it from the category of liabilities entirely.

The incorrect option is 4:
**Other current liabilities** include obligations that are expected to be settled within the company's normal operating cycle or within twelve months from the reporting date, such as interest accrued but not due, unearned revenue, or short-term statutory obligations. Share warrants are inherently long-term instruments, often having an exercise period of a year or more, and the funds received from them are not intended for settlement in the immediate short term. Therefore, the long-term nature and the equity character of the funds prevent their classification as a current liability.