Which party is owed money and needs to be settled within the next 12 months?

• A. Debentures
• B. Overdrafts
• C. Revenue expenditure
• D. Creditors

Answer: (D)

The main idea here is current liabilities and who the business owes money to. A creditor is someone to whom the company owes money for goods or services, typically settled within the next 12 months. These short-term payables are what we call current liabilities.

Debentures are a form of borrowing from investors and are usually treated as long-term debt, not obligations that must be settled within a year. An overdraft is a bank borrowing; the company owes the bank, but the focus of the question is on the party that is owed money, which points to creditors who are owed by the business for purchases made on credit. Revenue expenditure refers to expenses recognized in the period, not a payable to a third party.

So the correct idea is that creditors are the party owed money and expected to be settled within the next year.