Creative accounting refers to:
ADrawing diagrams in financial statements
BTwisting of accounting policies to produce favourable financial statements
CNew AS being introduced annually
DInnovative bookkeeping software
Answer & Solution
Correct answer: B. Twisting of accounting policies to produce favourable financial statements
1. Step 1: Per Ch 1, "creative accounting refers to twisting of accounting policies to produce financial statements favourable to a particular interest group".
2. Step 2: It typically involves overstating profits/assets via capitalisation or understating via write-offs.
3. Step 3: Hence (B) is correct.
_Source: ICAI BoS CA Inter Paper 1, Ch 1 "Introduction to Accounting Standards"_