Assertion :Depreciation amount is added back to net profit for calculating funds from operation in preparing a funds flow statement. Reason: Depreciation is an item of expense but not funds.

Both Assertion and Reason are true and Reason is the correct explanation of Assertion

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Both Assertion and Reason are true and Reason is not the correct explanation of Assertion

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Assertion is true but Reason is false

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Assertion is false but Reason is true

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Solution

The correct option is A Both Assertion and Reason are true and Reason is the correct explanation of Assertion
In accountancy, depreciation refers to two aspects of the same concept: The decrease in value of assets The allocation of the cost of assets to periods in which the assets are used Depreciation is a method of reallocating the cost of a tangible asset over its useful life span of it being in motion.

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