The statement concerning a funds statement based on the total resources concept of funds that is incorrect is:
A) It excludes internal transactions such as depreciation
B) The total resources concept of funds is the broadest concept
C) Any transaction which increases liabilities or equity is a source of funds
D) Any transaction which reduces assets is a use of funds

Question

Quizplus · Accepted Answer

The incorrect statement is D) Any transaction which reduces assets is a use of funds. Under the total resources concept of funds, a funds statement includes all transactions that change the total resources, which means both increases and decreases in assets, liabilities, and equity. A reduction in assets is not automatically considered a use of funds without considering the context of the transaction and its impact on total resources.

The Statement Concerning a Funds Statement Based on the Total