Question

Assertion (A): In a common-size statement, each item is expressed as a percentage of common base.

Reason (R): Common size statements are prepared both in the form of percentages and ratios.

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 (A) is correct.

• Both (A) and (R) are wrong.

Answer 1

Only (A) is correct.

Explanation:

The assertion (A) is correct because in a common-size statement, each item is expressed as a percentage of a common base, such as total assets in the balance sheet or operating revenue in the profit and loss statement.