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ACCA Applied Knowledge · Business and Technology · Financial information provided by business

Which of the following best describes the purpose of the notes to the financial statements?

The notes provide additional information and explanations, such as accounting policies and breakdowns of figures, which are not shown on the face of the primary statements. They support and explain those statements but do not replace them or permit selective, favourable reporting.

  1. ATo provide additional information and explanations, such as accounting policies, that are not shown on the face of the primary statementsCorrect
  2. BTo replace the statement of cash flows for small companies that do not wish to prepare one
  3. CTo allow management to present only favourable information to shareholders

Explanation

Notes set out accounting policies, breakdowns and other disclosures that support the primary statements. They do not replace any statement and are not a way to be selective with information.

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