Question

“The significance of financial statement data is not in the amount alone.” Discuss the meaning of this statement.

Short answer

Financial statements not only reveal the amount but also whether the amount is sufficient or not.

Step-by-step solution

Meaning of Financial Statement

Financial statements are written records that detail a company's business practices and monetary success. Government offices, accountants, and companies, among others, evaluate financial accounts on a regular basis to ensure accuracy and for valuation, financing, or investment purposes.

Explaining the meaning of the statement “The significance of financial statement data is not in the amount alone”

It has been claimed that "everything is relative" and that the information in the financial statements can certainly be anecdotal. The fundamental importance of the information in the financial statements is not in the amount shown but in their relative relevance; that is, arriving at a decision after comparing everything to comparable objects and tying it to the relevant information.

Financial statements do not only show the quantity (which is often not the case to limit the subjective view of things that reflect dollar numbers) but also whether the amount is sufficient or has not been given to the demands of the company. Or whether it speaks to quantities out of range, other quantities of the firm, or long-run progress, cannot be determined by lump sum numbers alone.