Question

Given below are two statements:
Statement (I): The income generated through self-liquidating loans is sufficient to clear off the entire loan amount in the same accounting year.
Statement (II): Net income \& net operating income can be calculated from the balance sheet. In light of the above statements, choose the most appropriate answer from the options given below:

• A. Both Statement (I) and Statement (II) are correct.
• B. Both Statement (I) and Statement (II) are incorrect.
• C. Statement (I) is correct but Statement (II) is incorrect.
• D. Statement (I) is incorrect but Statement (II) is correct.

Hint:

Self-liquidating loans: Repaid from project income in one year. Income calculations come from the income statement, not the balance sheet.

Answer 1

The Correct Option is C

Step 1: A self-liquidating loan is repaid from the income the financed activity generates in the same period, so Statement (I) is correct.
Step 2: Net income and net operating income come from the income statement, which records revenue and expenses over time.
Step 3: The balance sheet is a snapshot of assets and liabilities, it has no income figures.
Step 4: So Statement (II) is incorrect.
\[ \boxed{\text{Option (3): Statement (I) correct, Statement (II) incorrect}} \]