Question : Assertion A :- Analysis of financial statements is based on the information given in the financial statements. Hence, this analysis suffers from all such limitations from which the financial statements suffer.
Reason R:- The subjectivity is inherent in personal judgment, the financial statements are, therefore, not free from bias.
In the context of the above two statements, which of the following is correct?
Option 1: Both Assertion A and reason R are correct but the reason R is not the correct explanation of Assertion A
Option 2: Both Assertion A and reason R are correct but the reason R is the correct explanation of Assertion A
Option 3: Both Assertion A is correct but the reason R is not correct
Option 4: Both Assertion A is and reason R are not correct
Correct Answer: Both Assertion A and reason R are correct but the reason R is the correct explanation of Assertion A
Solution : Answer = Both Assertion A and reason R are correct but reason R is the correct explanation of Assertion A
The account is frequently required to select from a variety of options, such as the depreciation technique or the inventory value method, among others. The financial statement is consequently biased because personal judgment is inherently subjective. Hence, the correct option is 2.
Question : Assertion A: - Financial analysis identifies symptoms of the problems but does not offer its diagnosis. The management has to look for remedies to rectify the problems.
Reason R: - Analysis of financial statements is based on the information given in the financial
Question : Assertion A:- In many situations, the accountant has to make a choice out of alternatives available, e.g., choice in the method of inventory valuation, choice in the method of depreciation (straight line or written down value)
Reason R: - The subjectivity is inherent
Question : Assertion A:- Window dressing refers to the presentation of a better financial position than what it actually is by manipulating the books of account. On account of such a situation, financial analysis may give false information to the users.
Reason R:- Analysis of
Question : Assertion A:- The term; Financial Analysis includes both; Analysis; and Interpretation, Analysis is concerned with the simplification of financial data given in the financial statements by proper classification. Interpretation is concerned with explaining the meaning
Question : Assertion A: - For inter-firm comparison, it is necessary that accounting practices followed by the firms do not vary significantly. As there may be variations in accounting practices followed by different firms, a meaningful comparison of their financial statements is not
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