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:

When analyzing statements, carefully distinguish between financing, investing, and operating activities based on their definitions and characteristics.

Answer 1

The Correct Option is D

Step 1: Analyzing Statement I Financing activities indeed relate to long-term funds or capital of an enterprise. This statement is true.
Step 2: Analyzing Statement II While disclosure of cash flows from financing activities is essential, the reasoning provided in this statement is incorrect. Financing activities do not directly represent expenditures for generating future income and cash flows, which is a characteristic of investing activities.
Thus, the correct answer is \( \mathbf{(D)} \) Statement I is correct and Statement II is incorrect.