Question : When a fixed asset is bought as hire purchase, interest element is classified under ______ and loan element is classified under________.
Option 1: Operating activities, financing activities
Option 2: Financing activities, investing activities
Option 3: Investing activities, operating activities
Option 4: None of the above
Answer (1)
13th Jan, 2024
Correct Answer: Financing activities, investing activities
Solution : The cost of receiving financial resources or returns on investments is the cost of the fixed asset, which is purchased as a hire purchase. Therefore, the loan component is included under investment activities whereas the interest component is categorised under financing activities.
Hence the Correct answer is option 2.
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