Question

Assertion (A): Comparative Income Statement is the horizontal analysis of Income Statement.

Reason (R): In Comparative Income Statement, each item of Revenue from Operations, Other Income and Expenses is analysed horizontally 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

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

Explanation:

Assertion (A) is correct because a Comparative Income Statement tracks financial growth over multiple years, which is a horizontal analysis. Reason (R) perfectly explains this because it clarifies that the horizontal nature comes from analyzing each row item (like revenue, incomes, and expenses) side-by-side across two or more consecutive accounting periods.