Skip to content

CA Intermediate · Advanced Accounting · AS 1 Disclosure of Accounting Policies

Meghna Textiles Ltd. prepares its financial statements on a going concern basis and follows the accrual basis of accounting. In the current year, the company has not disclosed any of these three in its financial statements because it believes they are implied. Under AS 1, which of the following statements is correct?

Going concern, consistency and accrual are fundamental accounting assumptions under AS 1. When they are followed, their acceptance is assumed and no separate disclosure is needed. Disclosure is required only when a fundamental assumption is not followed, so Meghna Textiles need not disclose them.

  1. AGoing concern, consistency and accrual are fundamental accounting assumptions, and if they are followed no specific disclosure is requiredCorrect
  2. BGoing concern, consistency and accrual must always be disclosed in the notes, whether or not they are followed
  3. COnly the accrual basis needs disclosure because it affects the profit figure
  4. DFundamental accounting assumptions need disclosure only if the company is listed

Explanation

AS 1 treats going concern, consistency and accrual as fundamental accounting assumptions. If they are followed, no separate disclosure is needed. Disclosure is required only if any of them is not followed. Option B is wrong because it demands disclosure even when they are followed.

Did you get it right without looking?

One question tells you little. A timed set on AS 1 Disclosure of Accounting Policies shows your real accuracy, how long you take and where you lose marks.

Practise AS 1 Disclosure of Accounting PoliciesFree diagnostic mock

More AS 1 Disclosure of Accounting Policies questions