Accountancy Part BFinancial Statements of a Company

Financial statements are:

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → recorded facts

Financial statements are drawn from the figures already recorded in the books (original or historical cost), together with accounting conventions and personal judgements. They are not forecasts or estimates of the future.

NCERT (2026-27 edition):
Nature of Financial Statements – “… The following points explain the nature of financial statements: Recorded Facts: Financial statements are prepared on the basis of facts in the form of cost data recorded in accounting books. The original cost or historical cost is the basis of recording transactions.”