There are two statements marked as Assertion (A) and Reason (R). Mark your answer as per the options given below.

Assertion (A):  The sale of fixed assets is shown under the investing activities of the cash flow statement of a company.
Reason (R): The sale of fixed assets leads to an inflow of cash.

Both (A) and (R) are true, but (R) is not the correct explanation of (A).

The correct answer is option 2- Both (A) and (R) are true, but (R) is not the correct explanation of (A).

Assertion (A):  The sale of fixed assets is shown under the investing activities of the cash flow statement of a company. This is true fixed asset investment is a investing activity. So, sale of fixed asset is also a investing activity.
Reason (R): The sale of fixed assets leads to an inflow of cash. This is true as sale makes to increase the cash to the company.

Both statements are true but reason does not explain why assertion is true.

As per AS-3, investing activities are the acquisition and disposal of long-term assets and other investments not included in cash equivalents. Investing activities relate to purchase and sale of long-term assets or fixed assets such as machinery, furniture, land and building, etc. Transactions related to long-term investment are also investing activities. Separate disclosure of cash flows from investing activities is important because they represent the extent to which expenditures have been made for resources intended to generate future income and cash flows.