Question

Assertion (A): Balance Sheet of a Company is prepared according to the going concern concept.

Reason (R): Balance Sheet of a Company is based on absolute facts but is influenced by personal judgements.

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

Options

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

Explanation:

The Balance Sheet is indeed prepared based on the going concern concept, assuming the company will continue its operations. However, while the Balance Sheet is influenced by personal judgments (like depreciation methods), this does not explain the going concern basis of preparation. Thus, (A) and (R) are both correct independently, but (R) is not the reason for (A).