The full disclosure principle requires a balance between:

• A. providing sufficient information to users and avoiding information overload
• B. recording all contingent liabilities as actual liabilities on the balance sheet
• C. reporting all possible liabilities and ignoring materiality
• D. disclosing only positive financial information and omitting negative events

Answer: (A)

Verified step by step guidance

1. Understand the full disclosure principle: This principle in financial accounting requires that all relevant and material information be disclosed in the financial statements to ensure users can make informed decisions.
2. Recognize the balance required: The principle emphasizes providing sufficient information to users while avoiding overwhelming them with excessive details that may lead to confusion or information overload.
3. Eliminate incorrect options: For example, recording all contingent liabilities as actual liabilities on the balance sheet is incorrect because contingent liabilities are disclosed in the notes to the financial statements, not recorded unless they are probable and estimable.
4. Evaluate materiality: Reporting all possible liabilities and ignoring materiality is incorrect because materiality is a key concept in accounting that ensures only significant information is disclosed.
5. Focus on neutrality: Disclosing only positive financial information and omitting negative events violates the principle of neutrality, which requires that both positive and negative information be disclosed to provide a fair and complete view of the financial position.