Which of the following is true about financial statements?
A) Financial statement gives a summary of accounts.
B) Financial statements can be stated as recorded facts.
Financial statements can be stated as recorded facts as well as it provides a summary of accounts.
Financial statements are tools that provide consistency between businesses, no matter what services they provide. The nature of financial statements may be understood as follows
Based on Recorded Facts: Financial statements are based on facts and transactions that are recorded in the books of accounts As, the amounts of Building, Plant and Machinery, Cash in Hand, Cash at the Bank, Sales, and Purchases are all recorded facts and evidence in the books of accounts.
Based on Accounting Conventions: Financial statements are based on certain essential accounting principles such as valuing inventory at market price or cost price whichever is lower, representing assets in the balance sheet at cost less depreciation, and following the principle of materiality for items of trivial value. The use of accounting conventions makes financial statements comparable, simple and realistic.