Question

Financial statements that give effect to a subsequent event as though the event had occurred at the balance sheet date are known as __________ financial statements.

Answer 1

The correct answer to the following question is Pro forma financial statements.

Step-by-step explanation:

A subsequent event can be defined as an event which takes place after the reporting period, but before the financial statements of a company are issued. And depending on what kind of event they are like additional information or new events, it will be decided whether these events should be disclosed in a company's financial statement or not.

If it is decided that the subsequent event should be disclosed in the company's financial statement then a pro forma financial statement would be made, in which nature and financial effect of the subsequent event should be disclosed.