Question

Assertion (A): Financial Statements are the summarised statements which give information as to financial performance and financial position of the company.

Reason (R): Statement of Profit & Loss gives the information as to net profit or net loss for the year while Balance Sheet gives information of financial position of the company as at that date.

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

पर्याय

• 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 true because financial statements are structured summaries meant to report a company’s financial performance and financial health. The Reason (R) is also true and directly explains the assertion by specifying the exact role of each document: the Statement of Profit & Loss calculates the financial performance (profit or loss), while the Balance Sheet shows the financial position (assets and liabilities).