Worked Solution
✓ VerifiedStatement (i): FALSE
The fundamental accounting assumptions – Going Concern, Accrual Concept, and Consistency – are universally understood and accepted as the foundation of financial reporting. These assumptions are generally NOT specifically stated in every set of financial statements precisely because their acceptance and use ARE assumed and presumed. They are disclosed only when there is a departure from them. The statement incorrectly reverses this logic.
Statement (ii): FALSE
AS 1 (Disclosure of Accounting Policies) mandates that if any fundamental accounting assumptions are not followed, a specific disclosure of such departure must be made. This disclosure requirement is essential because departures from fundamental assumptions significantly affect the reliability, interpretation, and comparability of financial statements.
Statement (iii): TRUE
Per AS 1 (Disclosure of Accounting Policies), all significant accounting policies adopted in the preparation and presentation of financial statements must be disclosed as part of the financial statements. This disclosure requirement ensures that users have complete information about the accounting bases and methods used, enabling them to understand and evaluate the financial statements properly.
Statement (iv): FALSE
AS 5 (Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies) explicitly requires that when an accounting policy is changed and has a material effect, the following must be disclosed:
• The nature and reason for the change
• The amount by which any item in the financial statements is affected by such change, when ascertainable, wholly or in part
The statement incorrectly suggests that "facts need not to be indicated" when the impact is ascertainable. In reality, when the quantitative effect is ascertainable, it must be disclosed to inform users of the impact of the accounting policy change.
Write it like this
1The skeleton
- Write TRUE/FALSE in bold on the very first word — examiners literally scan for the verdict before reading your reason; burying it mid-sentence risks losing the easy half-mark.
- Cite the AS by name and number immediately after your verdict — 'As per AS 1...' or 'As per AS 5...' in the opening clause signals you're anchoring to the standard, not just guessing.
- State what the standard ACTUALLY says before pointing out the error — positive rule first, then contrast with the flawed statement; this structure proves you know the law, not just that something is wrong.
- For the 'not followed' statements on fundamental assumptions, flip the disclosure logic explicitly — say assumptions are presumed and NOT disclosed when followed, ONLY when departed from; the contrast between the two scenarios is exactly what earns the reason mark.
- Cap your reason at 2-3 lines per statement — True/False with reason is not a short note; examiners want verdict + key phrase + rule, not a paragraph; going beyond 3 lines wastes time you need for the remaining statements.
2Examiner-rewarded phrases
3Common trap
Most students write 'fundamental assumptions must always be disclosed' — the exact reverse of what AS 1 says — and still mark the statement FALSE correctly, so they think they're fine. But the reason mark goes to whoever explains that assumptions are presumed, hence NOT disclosed when followed, and disclosed ONLY on departure; if your reason says the opposite, you lose the reason mark even with the right verdict.