Assertion: Financial statements are prepared on the basis of facts in the form of cost data recorded in accounting books.

Reasoning: The financial statements show the correct current financial condition of the concern.

Assertion (A) is true but Reasoning (R) is not correct.

Recorded Facts: Financial statements are prepared on the basis of facts in the form of cost data recorded in accounting books. The original cost or historical cost is the basis of recording transactions. The figures of various accounts such as cash in hand, cash at bank, trade receivables, fixed assets, etc., are taken as per the figures recorded in the accounting books. The assets purchased at different times and at different prices are put together and shown at costs. As these are not based on market prices, the financial statements do not show current financial condition of the concern.