The 'Concept of Prudence' under Ind AS is: MCQ with Answer and Explanation

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The 'Concept of Prudence' under Ind AS is:

A. A fundamental accounting assumption

B. An overriding principle

C. Not specifically identified as a separate concept; neutrality overrides prudence

D. Always applied

Answer: Option C

Solution (By JKSSB Mock Tests)

The Conceptual Framework under Ind AS/IFRS does not include prudence as a separate qualitative characteristic; it emphasises neutrality.

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Question #1

Under the 'Reducing Balance Method' of depreciation, the asset's value:

A. Never becomes zero

B. Becomes negative

C. Becomes zero at the end of useful life

D. Remains constant

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Correct Answer: Option A

Explanation:
Under WDV method, the book value never reaches zero, as depreciation is charged on reducing balance.

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Question #2

The 'True and Fair View' is an overriding requirement of:

A. Tax returns

B. Management accounts

C. Financial statements

D. GST returns

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Correct Answer: Option C

Explanation:
Financial statements must present a true and fair view of the entity's financial position and performance.

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Question #3

The concept of 'Cost Control' differs from 'Cost Reduction' in that Cost Control:

A. Is applicable only to research and development

B. Assumes a permanent reduction in unit cost

C. Seeks to maintain costs within predefined standards/budgets

D. Challenges existing standards to find cheaper methods

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Correct Answer: Option C

Explanation:
Cost control ensures costs do not exceed the set budget/standard, while cost reduction seeks to permanently lower the standard itself.

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