Accounting standard 1

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Accounting standard 1

  1. 1. ACCOUNTING STANDARDS<br />By harshada baviskar <br /> madhuri bari<br /> vasundhara rawlani<br />
  2. 2. ACCOUNTING STANDARD (AS) 1<br />DISCLOSURE<br />OF<br />ACCOUNTING PRINCIPLES<br />
  3. 3. Disclosure of accounting principles<br />Accounting Standard (AS) 1<br />issued by the Accounting Standards Board<br />on ‘Disclosure of Accounting Policies’.<br /> The Standard deals with the disclosure of significant accounting policies followed in preparing and presenting financial statements.<br />
  4. 4. Disclosure of accounting principles: <br />Introduction…<br />All significant accounting policies adopted in the preparation and presentation of financial statements should be disclosed in one place.<br />There is no single list of accounting policies which are applicable to all circumstances.<br />Is required by law in some cases.<br />The nature and degree of disclosure vary between Corporate and Non-Corporate sectors.<br />In some cases it forms part of accounts, while in others it is given as supplementary information.<br />It also facilitates a more meaningful comparison between financial statements of different enterprises.<br />
  5. 5. Fundamental accounting assumptions<br />Following are the Fundamental Accounting Assumptions. If any assumptions is not followed in the financial statements, the fact should be disclosed.<br />GOING CONCERN:The enterprise is normally viewed as a going concern, that is, as continuing in operation for the foreseeable future.<br />CONSISTENCY: To achieve comparability of the financial statements of enterprise through time, the accounting policies are followed consistently from one period to another. If any changes are there they must disclose it.<br />ACCRUAL: Revenues and costs are recorded in the financial statements of the periods to which they relate.<br />
  6. 6. AREAS IN WHICH DIFFERING ACCOUNTING POLICIES ARE ENCOUNTERED<br />FIXED ASSETS & DEPRECIATION:<br />Cost of fixed assets includes the incidental expenses related to the acquisition and installation of the assets & pre-operative expenses capitalized and allocated to Fixed Assets.<br />Fixed assets are stated at cost of purchase less depreciation. <br />Dep. Methods: Straight line, Written Down Value, Sum of the year’s digits, <br /> Production Units method.<br />Plant and Machinery % per annum<br />Office Equipments % per annum<br />Computer & Software % per annum<br />Vehicles % per annum<br />Leasehold improvements % per annum<br /><ul><li>Fixed assets costing less than Rs.5,000/- are fully depreciated in the year of purchase.</li></li></ul><li>AREAS IN WHICH DIFFERING ACCOUNTING POLICIES ARE ENCOUNTERED CONT…<br />EXPENDITURE DURING CONSTRUCTION PERIOD:<br />In some cases the expenditure is divided in 2 parts:<br />Direct & Indirect. Direct exp. is allocated to cost of assets & Indirect exp is charged to revenue.<br />
  7. 7. AREAS IN WHICH DIFFERING ACCOUNTING POLICIES ARE ENCOUNTERED CONT…<br />VALUATION of INVENTORIES<br /> Inventories are valued at lower of cost and net realisable value. The basis of determining cost is set out below:<br />Stores and spares “Weighted Average Basis”<br /> Raw materials & components “Weighted Average Basis”<br /> Packing materials “Weighted Average Basis”<br /> Work-in-progress “Cost of Raw materials, conversion cost and appropriate share of production Overheads.<br />
  8. 8. AREAS IN WHICH DIFFERING ACCOUNTING POLICIES ARE ENCOUNTERED CONT…<br /><ul><li>FOREIGN CURRENCY TRANSACTIONS
  9. 9. TREATMENT OF CONTINGENT LIABILITIES.
  10. 10. TREATMENT OF RETIREMENT BENEFITS
  11. 11. TREATMENT OF GOODWILL</li></li></ul><li>CONSIDERATIONS IN THE SELECTION OF ACCOUNTING POLICIES<br />Financial statements prepared and presented should represent a true and fair view.<br />The major considerations governing the selection and application of accounting policies are: <br />PRUDENCE<br />SUBSTANCE OVER FORM<br />MATERIALITY<br />
  12. 12. PRUDENCE:<br />Profits are recognised only when realised but provision is made for all known liabilities and losses<br />SUBSTANCE OVER FORM:<br /> Accounting transactions and events should be governed<br /> by their substance and not merely by the legal form.<br /><ul><li>MATERIALITY:
  13. 13. Financial statements should disclose all “material” items, which might influence the decisions of the users. </li></li></ul><li>disclosure of accounting policies<br />Summarize…<br />To ensure proper understanding of financial statements<br />Such disclosure should form part of the financial statements.<br />It would be helpful to the reader of financial statements if they are all disclosed at one place.<br />Any change in an accounting policy which has a material effect should be disclosed<br />The amount by which any item in the financial statements is<br /> affected by such change should also be disclosed<br />
  14. 14. Thank you…<br />

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