Question

Assertion (A): ‘Sale of Property’ is an Operating Activity for a Real Estate Company.

Reason (R): Sale/purchase of property is the Principal Revenue Producing Activity for a Real Estate company.

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 correct because for a real estate company, properties are treated as inventory rather than long-term fixed investments, making their sale part of day-to-day operations. Reason (R) is also correct and provides the exact logical explanation, as operating activities are defined as the principal revenue-producing activities of a business, which in the case of a real estate firm is directly the buying and selling of property.