What is the purpose of the 'notes to the financial statements'?

The purpose of the 'notes to the financial statements' is to provide additional detail and context for the financial statements. These notes are an integral part of the financial reporting process and help users understand the information presented in the main financial statements, such as the income statement, balance sheet, and cash flow statement.

The notes include explanations of accounting policies, breakdowns of specific line items, disclosures about significant events and transactions, and other relevant information that enhances the clarity of the financial data. By providing this context, the notes allow users—including investors, creditors, and analysts—to make informed decisions based on a comprehensive understanding of the entity’s financial position and performance.

While the notes may include some information related to accounting policies or specific ratios, their primary function is to offer a broader interpretative framework for the financial statements as a whole rather than focusing solely on any single aspect. This richness of detail is essential for a complete picture, which is why option B is the most accurate representation of the notes' purpose.