Question

Explain the complete disclosure principle.

Answer 1

1. The complete disclosure principle requires that all significant information relating to the economic affairs of an enterprise must be fully and completely disclosed in the financial statements and their accompanying footnotes. Financial statements are meant for the use of owners, investors, suppliers, lenders, bankers, employees, government and others.
2. While preparing financial statements, it should be ensured that significant facts or information are not omitted. It has special significance in case of joint stock companies in which ownership and management are separate. Items which do not find a place in accounting statements are shown in the balance sheet by way of footnotes.