PRC-1 · Chapter 1 · Question 23 of 100
Which of the following accounting practices best illustrates the 'Substance over form' concept?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Recording a vehicle acquired on a finance lease as an asset, even though legal title has not transferred.
Explanation
Substance over form dictates that financial statements should reflect the economic reality of a transaction rather than just its legal form. Recording a leased asset reflects that the business enjoys its economic benefits despite lacking legal title.
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