Question

T/F: Users of financial statements are assumed to need no knowledge of business and financial accounting matters to understand information contained in financial statements.

Answer 1

Users of financial statements need knowledge of business and financial accounting matters.

Step-by-step explanation:

The statement is False. Users of financial statements are assumed to have at least a basic understanding of business and financial accounting matters to accurately interpret and analyze the information contained in the statements.

Financial statements such as the balance sheet, income statement, and cash flow statement are prepared based on Generally Accepted Accounting Principles (GAAP) which require certain standards and assumptions. These statements include complex terminology and accounting concepts that necessitate some level of knowledge from users.

For example, understanding terms like assets, liabilities, equity, revenues, and expenses is crucial in comprehending the financial position and performance of a company as depicted in the statements.