Chapter 2, Problem 1STQ

To determine

Find out the features of financial statements from the options that are given.

Answer to Problem 1STQ

Options of a, b and d are correct answer.

Explanation of Solution

Financial statements: Financial statements are condensed summary of transactions communicated in the form of reports for the purpose of decision making.

Justification for the incorrect option c:

Includes notes disclosing information necessary for the proper interpretation of the statements is not a feature of financial statements. Therefore it is an option c incorrect.

Justification for the correct options a, b and d:

A primary source of financial information is a company’s’ financial statements, following are the features of financial statements:

• Financial statements provide insight in to current years’ financial status of the Company.
• It provides investors, creditors and other interested parties a wealth of useful information.
• It assists in determining the amount of income taxes payable by a business organization for filing income tax returns to the Internal Revenue Service.

Therefore, from the above explanation Options of a, b and d are correct and the other option of c is incorrect.