Question

Assertion (A): Financial statements of a company are prepared in the form prescribed in Schedule III of the Companies Act, 2013.

Reason (R): The Companies Act, 2013, prescribes Schedule III, as per which financial statements are prepared by all companies.

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

विकल्प

• Both Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation for Assertion (A).

• Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation for Assertion (A).

• Only Assertion (A) is correct.

• Both Assertion (A) and Reason (R) are not correct.

Answer 1

Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation for Assertion (A).

Explanation:

The Assertion (A) is correct because all registered companies are legally required to prepare their financial statements (Balance Sheet and Statement of Profit and Loss) in the exact format specified by Schedule III. The Reason (R) is also correct and provides the exact logical backing for the assertion: it establishes that Schedule III is a statutory mandate created by the Companies Act, 2013, making it binding for all companies to follow.