Question

Window dressing is a practice

• A. To manipulate accounts to show a better picture of the financial position than the actual one
• B. To show excessive depreciation
• C. To avoid tax
• D. To reduce tax

Answer 1

The Correct Option is A

Solution:

The concept of 'Window Dressing' in accountancy refers to the manipulation of financial statements to present a more favorable view of a company's financial position than what is actually the case. This practice can involve various techniques such as altering the presentation of accounts, adjusting figures, or timing certain financial operations to make the financial statements appear more attractive to stakeholders such as investors, creditors, or financial analysts.

The primary aim of window dressing is not necessarily to evade taxes or depreciate assets more than necessary; rather, it focuses on improving the perceived financial health and value of a company as depicted in its financial reports. Therefore, the correct understanding of window dressing aligns with:

• To manipulate accounts to show a better picture of the financial position than the actual one.

Answer 2

Window dressing refers to the practice of manipulating financial statements to make a company's financial position appear stronger or more favorable than it actually is. This can involve various methods, such as altering asset valuations or inflating profits, to mislead stakeholders about the true financial health of the company.

Thus, the correct answer is:

(1) to manipulate the accounts to show a better picture of the financial position than the actual one.