Question

Consider the following statements.

Statement 1 - "Recorded facts are based on replacement cost"

Statement 2 - "Recorded facts are not based on replacement cost"

Options

• Only statement 1 is correct

• Only statement 2 is correct

• Both the statement are correct

• None of these

Answer 1

Only statement 2 is correct 

Explanation:

Financial statements are the result of documented facts, accounting ideas and conventions used, and personal judgments made by accountants in various scenarios. As a result, bias in the findings may be seen, and the financial position depicted in financial statements may not be realistic.