There are two statements marked as Assertion (A) and Reason (R). Mark your answer as per the options given below.

Assertion (A):  Analysis of financial statements suffers from the limitation of not being free from personal bias.
Reason (R): Preparation of financial statements involves personal bias (e.g., choosing the depreciation method) and therefore analysis of financial statements also has this limitation.

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

The correct answer is option 1- Both, Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A).

Assertion (A):  Analysis of financial statements suffers from the limitation of not being free from personal bias. THIS IS TRUE.  Financial analysts or users of financial statements may interpret data differently based on their own biases or perspective.

Reason (R): Preparation of financial statements involves personal bias (e.g., choosing the depreciation method) and therefore analysis of financial statements also has this limitation. THIS IS TRUE. The preparation of financial statements involves subjective decisions (such as selecting accounting policies or estimation methods), which can introduce bias. This bias can carry over into the analysis of financial statements by users who interpret the data.

Thus, both statements are true and reason explain why assertion is true.