Question

Which of the following are the objective of financial statements?
A. To provide information about economic resources and obligations of a business.
B. To provide information about the earning capacity of the business.
C. To not judge effectiveness of management.
D. Disclosing accounting policies.

• A. A, B, C
• B. A, B, D
• C. A, C, D
• D. B, C, D

Answer 1

Answer: (B)

A, B, D

Financial statement summarized reports of recorded facts and are prepared following the accounting concepts, convention and requirements of law. Objective of financial statements are as follows:

1. To provide information about economic resources and obligations of a business.

2. To provide information about the earning capacity of the business.

3. To provide information about cash flows.

4. To judge effectiveness of management.

5. Information about activities of business affecting the society.

6. Disclosing accounting policies.