Question

Statement I: Financing activities relate to long-term funds or capital of an enterprise.
Statement II: Separate disclosure of cash flows arising from financing activities is important because they represent the extent to which expenditures have been made for resources intended to generate future income and cash flows.
Choose the correct option from the following:

• A. Both Statement I and Statement II are correct.
• B. Both Statement I and Statement II are incorrect.
• C. Statement I is incorrect and Statement II is correct.
• D. Statement I is correct and Statement II is incorrect.

Hint:

Financing activities focus on raising and repaying long-term funds, whereas investing activities relate to acquiring or disposing of long-term assets.

Answer 1

The Correct Option is D

Analysis of Statement I: Financing activities involve obtaining or repaying funds related to long-term capital, such as issuing shares, repurchasing shares, or repaying loans. Therefore, Statement I is correct. Analysis of Statement II: The statement incorrectly associates financing activities with expenditures for resources intended to generate future income and cash flows. This is more relevant to investing activities, not financing activities. Hence, Statement II is incorrect. Conclusion: Statement I is correct as it accurately describes financing activities, while Statement II is incorrect because it refers to investing activities instead.