Skip to content

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

Sahyadri Textiles Ltd prepares its financial statements on the assumption that it will continue in operation for the foreseeable future and that expenses and incomes are recognised when they accrue, not when cash moves. Under AS 1, which of the following correctly lists the fundamental accounting assumptions?

The fundamental accounting assumptions under AS 1 are going concern, consistency and accrual. Prudence, substance over form and materiality are factors guiding the selection of accounting policies, not assumptions. Hence the option listing going concern, consistency and accrual is the correct one.

  1. AGoing concern, consistency and accrualCorrect
  2. BPrudence, consistency and accrual
  3. CGoing concern, substance over form and materiality
  4. DGoing concern, prudence and consistency

Explanation

AS 1 recognises three fundamental accounting assumptions: going concern, consistency and accrual. Prudence, substance over form and materiality are considerations in the selection and application of accounting policies, not fundamental assumptions, so the other options mix in items that are not assumptions.

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