Question

Assertion (A): Comparative Balance Sheet is the horizontal analysis of Balance Sheet.

Reason (R): In Comparative Balance Sheet, each item of Assets and Liabilities is analysed vertically for two or more accounting periods.

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

Options

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

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

• Assertion (A) is false, and Reason (R) is true.

• Assertion (A) is true, and Reason (R) is false.

Answer 1

Assertion (A) is true, and Reason (R) is false.

Explanation:

Assertion (A) is true because a Comparative Balance Sheet places figures side-by-side to track trends over multiple years, which is a horizontal analysis. Reason (R) is false because individual assets and liabilities are evaluated horizontally across different years to find changes, not vertically.