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 possible.

Reason R: - Analysis of financial statements is based on the information given in the financial statements. Hence, this analysis suffers from various limitations from which the financial statements.
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 and Reason R are not correct

Question

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 possible.

Reason R: - Analysis of financial statements is based on the information given in the financial statements. Hence, this analysis suffers from various limitations from which the financial statements.

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 and Reason R are not correct

Team Careers360 · Accepted Answer

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

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 possible. Analysis of financial statements is based on the information given in the financial statements. Hence, this analysis suffers from various limitations from which the financial statements.
Hence, the correct option is 2.

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Question : Assertion A :- Price level changes and the purchasing power of money are inversely related. A change in the price level makes analysis of financial statements of different accounting years invalid.

Reason R :- Accounting records ignore changes in the value of

Question : Assertion A :- Price level changes and the purchasing power of money are inversely related. A change in the price level makes analysis of financial statements of different accounting years invalid.

Reason R :- Accounting records ignore changes in the value of

Question : Statement 1: In management accounting, data from cost accounting and financial accounting are both used.
Statement 2: Therefore, a suitable system is required to combine cost accounts and financial accounts.

Question : Statement 1: For efficient analysis and interpretation, the financial accounting data is categorised and codified.
Statement 2: The accounts are categorised according to their nature.