Question

Consider the following statements.

Statement 1 - "Facts and figures presented in financial statements are based on personal judgements"

Statement 2 - "Facts and figures presented in financial statements are not at all based on personal judgements"

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:

Accounting facts provide an unfavourable sense of clarity and finality. Accounting statistics, in reality, "represent a combination of recorded facts, accounting rules, and personal judgments, and the judgments and conventions used considerably impact them." As a result, the financial statements' facts and statistics are reliant on personal judgments. The profit of a business, for example, is not a precise and final sum. It is simply the accountant's opinion based on the application of accounting policies.