Question

Assertion (A): Movement between the items that are part of Cash or Cash Equivalents doesn’t result into cash flow.

Reason (R): These are the components of Cash and Cash Equivalents.

In the context of the above two statements, which option is correct?

Options

• Assertion (A) and Reason (R) are correct, but Reason (R) is not the correct explanation of Assertion (A).

• Both Assertion (A) and Reason (R) are correct, and Reason (R) is the correct explanation of Assertion (A).

• Assertion (A) is correct, but Reason (R) is not correct.

• Assertion (A) is not correct, but Reason (R) is correct.

Answer 1

Both Assertion (A) and Reason (R) are correct, and Reason (R) is the correct explanation of Assertion (A).

Explanation:

Assertion (A) is true because moving money between items like physical cash, bank deposits, or short-term investments does not change the total available liquidity, meaning no cash flow occurs. Reason (R) is true and perfectly explains the statement because all these items are already grouped together as components of Cash and Cash Equivalents.