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    Question

    A firm wants to classify its expenses by nature

    (salaries, depreciation, rent, etc.) in its Income Statement. According to Schedule III of Companies Act, which presentation format is it adopting?
    A Functional classification Correct Answer Incorrect Answer
    B Vertical classification Correct Answer Incorrect Answer
    C Natural classification Correct Answer Incorrect Answer
    D Consolidated format Correct Answer Incorrect Answer

    Solution

    Classifying expenses by type (nature) rather than function (e.g., admin, selling) is known as natural classification and is permitted under Schedule III for companies.

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