Question

Assertion (A): Comparative balance sheet is the horizontal analysis of balance sheet items.

Reason (R): In comparative balance sheet, each item of assets, liabilities and shareholder’s funds is placed side-by-side to facilitate comparison.

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

Explanation:

A comparative balance sheet is indeed the horizontal analysis of balance sheet items, where each item of assets, liabilities, and shareholders’ funds is presented side-by-side for two or more periods to facilitate easy comparison and analysis of increases or decreases in absolute and percentage terms.