This question haunts me a bit because on my book cover it'll say "based on a true story." What does that mean? I wonder myself. I wanted the truth to be in the historical events surrounding my character. I wanted my character to be true to the personal trauma my mother experienced - loss of home, of parents, of her dog. I wanted my character to be true to the vanities, insecurities and interests of an eleven-year-old girl (here, I'd say I relied more on my own girls & my childhood - but the imaginary girl of the book has definite character traits of my 90-year-old mother who retains a lot of that eleven-year-old fighting spirit).
The beauty and strength of fiction is that - like a math equation - you can work everything out. If it doesn't balance - if the events and the character do not come to terms with each other in some way - then the story fails. Of course, an author manipulates the plot and the character development. After all, in our finite world of the book, we are the creators. We get to choose which characters stay or go. But it's the readers who judge 'the truth' of that world. And like in math, we have 'theorems' to go along with the equations. Each piece of fiction has a 'theorem' - and that is what the author sets out to prove.
Truth? Can it be simple math? Let's see.
If a + b = c then c -b = a
If girl (a) plus dog (b) equals home (c) , then home (c) minus dog(b) equals girl (a)
But this is where math fails. Yes, we have girl - but we have a changed girl. How do you show that truth? Man, back to the books. Math and me will never get along.