Which principle requires that all relevant financial information be disclosed in the financial statements?

The correct answer is the full disclosure principle, which mandates that all relevant financial information be included in the financial statements. This principle ensures that users of financial statements—such as investors, creditors, and other stakeholders—have access to all necessary information to make informed decisions regarding the entity’s financial health and performance. The goal is to provide transparency and prevent misleading financial reporting, thereby fostering trust in the financial information presented.

This principle is integral to accounting because it addresses the need for comprehensive information that surrounds not only the numbers presented in financial statements but also related contingencies, management decisions, and uncertainty that could affect those numbers. By adhering to the full disclosure principle, companies aim to achieve a complete picture of their financial situation, helping users understand the context behind the reported figures.

Other principles such as the going concern principle, cost principle, and time period assumption serve different purposes in accounting. The going concern principle assesses whether an entity is expected to continue its operations in the foreseeable future, while the cost principle emphasizes recording assets at their original cost. The time period assumption allows for the reporting of financial results over specified periods, but none of these principles specifically address the need for comprehensive disclosure of all relevant information in the financial statements like the full disclosure principle does.