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Question
Assertion (A): Balance Sheet of a Company is prepared on a particular date.
Reason (R): Statement of Profit and Loss of a Company is prepared for a particular period.
In the context of the above two statements, which of the following is correct?
Options
Both (A) and (R) are true, but (R) is not the correct explanation of (A).
Both (A) and (R) are true and (R) is the correct explanation of (A).
Both (A) and (R) are false.
(A) is false, but (R) is true.
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Solution
Both (A) and (R) are true, but (R) is not the correct explanation of (A).
Explanation:
A Balance Sheet is a statement of financial position prepared “as at” a particular date (a snapshot), whereas the Statement of Profit and Loss shows the financial performance “for a particular period”; the fact that P&L is for a period does not explain why the Balance Sheet is prepared at a date.
