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Need for Analysis of Financial Information

Selection of ...

Question

Selection of an accounting policy should be governed by _________.

A

Prudence

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B

Materiality

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C

Substance over form

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D

All the three

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Solution

The correct option is C All the three
The main consideration while selecting the accounting policies:
Prudence: Many transactions in business take place in uncertainty.
Materiality: FInancial statement must disclose all the material item.
Substance over form: Only the economic substance of the transactions and events must be recorded in financial statement.

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