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

Under AS 1, which of the following considerations governs the selection and application of accounting policies, in order of importance?

AS 1 lists the major considerations as prudence, substance over form and materiality, in that order. These guide management in selecting and applying accounting policies so that the financial statements present a true and fair view.

  1. AMateriality, prudence, substance over form
  2. BPrudence, substance over form, materialityCorrect
  3. CSubstance over form, materiality, prudence
  4. DPrudence, materiality, consistency

Explanation

AS 1 states the major considerations in selecting and applying accounting policies are prudence, substance over form and materiality. This is the order in which the standard lists them. Other orderings or consistency in that list do not match the standard.

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