Question :
Assertion:- Cash Flow Statement shows inflow and outflow of Cash and Cash Equivalents under Operating, Investing, and Financing Activities of a company during a specified period.
Reason (R): The cash Flow Statement traces the Flow of Cash and Cash Equivalents into and out of the business during an accounting period under Operating, Investing, and Financing Activities.
In the context of the above two statements, which of the following is correct.
Option 1: Assertion (A) and Reson (R) are correct but the reason (R) is not the correct explanation of Assertion (A).
Option 2: Both, Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A)
Option 3: Assertion (A) is correct but the Reason (R) is not correct
Option 4: Both, Assertion (A) and Reason (R) are in incorrect
Correct Answer: Both, Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A)
Solution : Both, Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A) Since a company's operating, investing, and financing activities are listed under the Cash Flow Statement during a specific time period, it displays the inflow and outflow of cash and cash equivalents.
Hence the correct answer is option 2.
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