Question

By the misuse of which convention Secret Reserve' is created
e Conservatism
b. Materiality
e Consistency
d. Full Disclosure​

Answer 1

By the misuse of materiality convention secret reserve is created.

Explanation:

• The concept of the secret reserve is not shown in the balance sheet.
• A decrease in the value of assets and an increase in the liabilities helps in the creation of secret reserves.
• While creating secret reserves, prevention, prudence should not exceed the limits.
• If the reverse happens and expenditures exceed the limits then the creation of secret reserves is not justifiable.