Question

Assertion (A): Payment of a hire-purchase installment will be classified as an investing activity while preparing a cash flow statement.

Reason (R): Principal amount of hire-purchase installment will be classified as an investing activity and interest will be classified as a financing activity.

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

Options

• Both (A) and (R) are correct and (R) is the correct reason of (A).

• Both (A) and (R) are correct but (R) is not the correct reason of (A).

• Only (R) is correct.

• Both (A) and (R) are wrong.

Answer 1

Only (R) is correct.