Question

Preparation of financial statements of a company is:

• A. Voluntary
• B. Compulsory
• C. Not essential
• D. None of these

Hint:

Financial statements are legally required under the Companies Act.

Answer 1

The Correct Option is B

Under the Companies Act, preparation of financial statements is mandatory for all registered companies. These statements include the balance sheet, profit and loss account, cash flow statement and explanatory notes. They ensure transparency, accountability and proper reporting to shareholders, creditors and regulatory authorities. Because financial statements are essential for evaluating performance and ensuring compliance, their preparation is compulsory and not optional.