Gujarat BoardEnglish MediumSTD 11 CommerceAccountP2 C6 Conventions, Assumption. Concepts and Principles ofAccounting3 Marks
Question
Explain the concept of full disclosure with example.
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Answer
According to this concept, all material information should be disclosed in the financial statements. To enable the users of the financial statements to take informed economic decision it is necessary to disclose all the relevant information in the financial statements. $NO$ material information affecting the interest of general investers should remain undisclosed or concealed. Financial statements should be prepared honestly. According to section$-129(1)$ of Companies Act, $2013,$ the financial statements shall give a true & fair view of the state of affairs of the company. Examples: $(1)$ Change in method of depreciation is material information. It also indicates change in policy, this should be disclosed in financial statements along with the impact of such change. $(2)$ Information about the change in method of stock or inventory valuation and its impact should be disclosed in financial statements. $(3)$ Attachment of appending notes or schedules, annexure etc. to the financial statements have developed as a result of fall disclosure principle e.g. infomation about contigent liabilities.
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