Assertion: Responsibility accounting is a system of accounting in which different sections, divisions and departments of an organisation are set up as ‘Responsibility Centers'.

 Reasoning: The head of a responsibility center is responsible for achieving the target set for his centre.

Both Assertion (A) and reasoning (R) are correct and R is the correct explanation of A.

Option 1: Both Assertion (A) and reasoning (R) are correct and R is the correct explanation of A.

Assertion (A) is true: Responsibility accounting assigns accountability for specific areas of an organization to different departments or sections, creating responsibility centers.

Reasoning (R) is also true: The head of each responsibility center is indeed held responsible for meeting the targets set for their particular area. This accountability motivates them to manage resources effectively and achieve those goals.

The reasoning explains the assertion i.e. and provides an explanation for how responsibility accounting works. The reasoning provided explains how responsibility accounting operates by elaborating on the accountability of the head of each responsibility center. In responsibility accounting, managers are held responsible for the performance of their centers based on the targets or budgets set for them. Therefore, the assertion and the reasoning are directly related, with the reasoning providing further clarification and elaboration on how responsibility accounting functions. Hence, Option 1 is correct: Both Assertion (A) and reasoning (R) are correct, and R is the correct explanation of A.