Question

    Under Accounting Standard 5 on Net Profit or Loss for

    the period, prior period items and changes in accounting policies must be disclosed separately. Why is this considered essential for financial statements?
    A To adjust P&L automatically Correct Answer Incorrect Answer
    B To ensure that users can differentiate recurring operating performance from non-recurring adjustments Correct Answer Incorrect Answer
    C To inflate profits legally Correct Answer Incorrect Answer
    D To simplify audit procedures Correct Answer Incorrect Answer
    E To avoid taxation issues Correct Answer Incorrect Answer

    Solution

    • AS 5 mandates separate disclosure of material prior period items and policy changes so that users can assess true operational performance vs adjustments.

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