Assertion (A): Comparative balance sheet is the horizontal analysis of balance sheet. Reason (R): Common-size balance sheet is the vertical analysis of balance sheet. In the context of the above two statements, which of the following is correct?

Question

KollegeApply · Accepted Answer

Both (A) and (R) are correct but (R) is not the correct reason of (A). Explanation: A comparative balance sheet involves horizontal analysis, as it compares figures of two or more periods to identify changes and trends over time. In contrast, a common-size balance sheet represents vertical analysis, where each item is expressed as a percentage of total assets to show its relative proportion. Therefore, while both statements are true, the reason does not directly explain the assertion.

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