Question

Assertion (A): Two broad heads under which Balance Sheet is prepared are Equity & Liabilities and Assets.

Reason (R): Part I of Schedule Ill of the Companies Act, 2013 prescribes to show Equity & Liabilities in first part followed by Assets in the second part.

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

Options

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

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

• Only Assertion (A) is correct.

• Both Assertion (A) and Reason (R) are not correct.

Answer 1

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

Explanation:

The Assertion (A) is correct because a corporate Balance Sheet is structurally divided into two major sections: Equity & Liabilities, and Assets. The Reason (R) is also correct and provides the exact explanation for the assertion. It establishes that this specific layout is legally mandated by Part I of Schedule III of the Companies Act, 2013, which requires companies to present the Equity & Liabilities section first, followed immediately by the Assets section.