Why are financial statements prepared on a comparative basis?
A)To provide users with easy comparison with the industry.
B)To provide users with a perspective on the economy.
C)Because making comparisons using accounting information can be difficult and misleading.
D)Because making comparisons significantly contributes to the interpretation of accounting information.

Question

Quizplus · Accepted Answer

Financial statements are prepared on a comparative basis because making comparisons significantly contributes to the interpretation of accounting information. Comparative financial statements provide users with the ability to analyze trends and changes in an organization's financial position and performance over time. This information is crucial to decision-making processes for investors, creditors, and other stakeholders. Comparative financial statements allow for better analysis and judgement by making it easier to assess changes in financial performance and position from year to year.

Why Are Financial Statements Prepared on a Comparative Basis