Given below are two statements, one labelled as Assertion (A) and the other as Reason (R):
Assertion (A): Capital expenditure is incurred for the purpose of acquiring fixed assets.
Reason (R): Capital expenditure item is shown in the asset side of the Balance sheet.
Select the correct answer:
A. Both (A) and (R) are true and (R) is the correct explanation of (A)
B. Both (A) and (R) are correct but (R) is NOT the correct explanation of (A)
C. (A) is true but (R) is false
D. (A) is false but (R) is true
Answer: Option A
Solution (By Examveda Team)
Assertion (A): Capital expenditure is incurred for the purpose of acquiring fixed assets.This statement is TRUE.
Capital expenditure is money spent to buy things that will last a long time and help the business make money in the future.
Think of things like buildings, machinery, or land. These are called fixed assets.
Reason (R): Capital expenditure item is shown in the asset side of the Balance sheet.
This statement is also TRUE.
The Balance Sheet is a snapshot of what a company owns (assets) and owes (liabilities) at a specific point in time.
Because fixed assets are things the company *owns*, they are listed on the asset side of the Balance Sheet.
Now, the important question is: Does Reason (R) *explain* why Assertion (A) is true?
Yes, It is correct explanation of Assertion.
So, the correct answer is:
Option A: Both (A) and (R) are true and (R) is the correct explanation of (A)
This Question Belongs to Commerce >> Accounting
Both are true