Question

Assertion (A): A Company’s Balance Sheet is prepared on a particular date and not for a particular period.

Reason (R): A Balance Sheet is true only for the date on which it is prepared because even a single transaction would cause a change in assets and liabilities.

In the context of the above two statements, which of the following is correct?

विकल्प

• Both (A) and (R) are correct and (R) is the correct reason of (A).

• Both (A) and (R) are correct but (R) is not the correct reason of (A).

• Only (R) is correct.

• Both (A) and (R) are wrong.

Answer 1

Both (A) and (R) are correct and (R) is the correct reason of (A).

Explanation:

A Balance Sheet is prepared as on a particular date because it shows the financial position of a company at that specific point in time. It is true only for that date since even a single transaction after that date changes assets and liabilities, making the Balance Sheet outdated. Hence, the reason explains why the Assertion is correct.