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 in personal judgment, the financial statements are, therefore, not free from bias. It is a limitation of financial statements.
Option 1: Both Assertion A and reason R are correct but reason R is not the correct explanation of Assertion A
Option 2: Both Assertion A and reason R are correct but 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
Correct Answer: Both Assertion A and reason R are correct but 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
In many situations, the accountant has to make a choice out of alternatives available, e.g., a choice in the method of inventory valuation, or a choice in the method of depreciation (straight line or written down value). The subjectivity is inherent in personal judgment, the financial statements are, therefore, not free from bias. It is a limitation of financial statements.
Hence, the correct option is 2.
