Question : Assertion: A purchase of furniture on credit will not result in flow of cash or cash equivalents
Reason R: - purchased of furniture on credit will not involve cash.
In the context of above two statements, which of the following is correct
Option 1: Assertion A and reason R are correct and reason R is correct explanation of assertion A
Option 2: Assertion A and reason R are correct but reason R is not the correct explanation of Assertion A
Option 3: Both assertion A and reason R are not correct
Option 4: Assertion A is correct but the reason R is not correct
Correct Answer: Assertion A and reason R are correct but reason R is not the correct explanation of Assertion A
Solution : Answer = Assertion A and reason R are correct, but reason R is not the correct explanation of Assertion A
Assertion A is correct because the purchase of furniture on credit does not involve the immediate outflow of cash or cash equivalents. However, reason R is incorrect as it oversimplifies the transaction, failing to acknowledge that credit transactions still involve future cash outflows to settle the debt.
Hence, the correct option is 2.
