There are two statements marked as Assertion (A) and Reason (R). Mark your answer as per the options given below.
Assertion (A): Financial Statements are the summarised statements that give information as to the profitability and financial position of the company.
Reason (R): Balance Sheet gives the information as to net profit or net loss for the year while Statement of Profit and Loss gives information on the financial position of the company as at that date.
Answer & explanation
Correct answer: option 3
The correct answer is option 3- Only Assertion (A) is correct.
Assertion (A): Financial Statements are the summarised statements that give information as to the profitability and financial position of the company. This is correct. Financial statements are the basic and formal annual reports through which the corporate management communicates financial information to its owners and various other external parties which include investors, tax authorities, government, employees, etc.
Reason (R): Balance Sheet gives the information as to net profit or net loss for the year while Statement of Profit and Loss gives information on the financial position of the company as at that date. This is not correct. Statement of Profit and Loss gives the information as to net profit or net loss for the year while Balance Sheet gives information on the financial position of the company as at that date.