Question

Assertion (A): Computer in a Company's Balance Sheet is shown under sub-head ‘Property, Plant and Equipment’.

Reason (R): Computer Software in a Company's Balance Sheet is shown under sub-head ‘Intangible Assets’.

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 a correct explanation of (A).

• Both (A) and (R) are false.

• (A) is false, but (R) is true.

Answer 1

Both (A) and (R) are true, but (R) is not the correct explanation of (A).

Explanation:

Computer hardware is classified as a tangible fixed asset and is shown under the sub-head “Property, Plant and Equipment” in the balance sheet as it is a physical asset used in operations. On the other hand, computer software is considered an intangible asset because it lacks physical substance and is shown separately under the sub-head “Intangible Assets”. Both statements are true, but the reason (R) does not explain the classification of hardware (A), so (R) is not the correct explanation of (A).