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 ignoring Price level changes.
Reason (R): Transactions are recorded at the value transacted on the date they are entered, The value of currency keeps changing, and therefore, financial statements do not give the current position and as a result, analysis of financial statements takes the value to be static. 

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

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

Assertion (A): Analysis of financial statements suffers from the limitation of ignoring Price level changes. THIS IS TRUE. Financial statements prepared under historical cost accounting do not account for changes in the general price level (inflation or deflation), which can distort the financial picture.

Reason (R): Transactions are recorded at the value transacted on the date they are entered, The value of currency keeps changing, and therefore, financial statements do not give the current position and as a result, analysis of financial statements takes the value to be static. THIS IS TRUE. Transactions are recorded at historical cost and not adjusted for subsequent changes in the value of currency. This leads to financial statements not reflecting the current economic reality.

Thus, both Assertion (A) and Reason (R) are correct and Reason (R) does provide an explanation for why Assertion (A) is true.