Practicing Success
When is the financial data of a company considered comparative? |
When the same accounting principles are used in preparing the statements When the statements are prepared for the same period When the deviation in accounting principles exists When the statements show a positive financial position |
When the same accounting principles are used in preparing the statements |
Financial data are considered comparative when the financial statements, such as the balance sheet and the statement of profit and loss, are prepared using the same accounting principles for different periods of time. Comparative statements present the financial information for two or more periods side by side, allowing for a direct comparison of financial performance and position over time. Using the same accounting principles is crucial for ensuring that the financial data are comparable and that any changes in the firm's financial position or profitability can be attributed to actual business performance rather than changes in accounting practices. If there are deviations in the use of accounting principles, they should be disclosed as footnotes to the financial statements to provide transparency and clarity to the users of the financial information. |