AS- Accounting Standard

1. Accounting standard-2 and 6
Subject : Accountancy
Subject faculty: Ms. Deepika Arora
Prepared by: Rahul Sharma

2. Accounting Standards(AS)
A principle that guides and standardizes accounting practices. The Generally
Accepted Accounting Principles (GAAP) are a group of accounting standards that
are widely accepted as appropriate to the field of accounting. Accounting
standards are necessary so that financial statements are meaningful across a wide
variety of businesses; otherwise, the accounting rules of different companies
would make comparative analysis almost impossible.

3. AS 2(REVISED) valuation of inventories
The standard specifies the methods of computation of cost of
inventories and method of determination of the value of the inventory
to be shown in the financial statement.
Objective: A primary issue in accounting for inventories is the
determination of the values at which inventories are carried in the
financial statements until the related revenues are recognized. This
statement deals with the determination of such value, including the
ascertainment, of the cost of inventories and any write-down thereof
to net realizable value.

4. Scope: This statement should be applied in accounting for inventories other than:
• Work in progress arising under construction contracts, including directly related
service contracts;
• Work in progress arising in the in the ordinary course of business of service
providers:
• Shares, debentures and other financial instruments held as stock in trade

5. DEPRECIATION
Depreciation is a measure of the wearing out, consumption or
other loss of value of a depreciable asset arising from use, effluxion of
time or obsolescence through technology and market changes.
Depreciation is allocated so as to charge a fair proportion of the
depreciable amount in each accounting period during the expected
useful life of the asset.

6. AS 6 (Revised)Depreciation accounting
This Standard deals with depreciation accounting and applies to all
depreciable assets, except the following items to which special considerations
apply:—
(i) forests, plantations and similar regenerative natural resources;
(ii) wasting assets including expenditure on the exploration for and
extraction of minerals, oils, natural gas and similar non-regenerative
resources;
(iii) expenditure on research and development;
(iv) goodwill and other intangible assets;
(v) live stock.
This standard also does not apply to land unless it has a limited useful life for
the enterprise.

7. Different accounting policies for depreciation are adopted by different
enterprises. Disclosure of accounting policies for depreciation followed by
an enterprise is necessary to appreciate the view presented in the financial
statements of the enterprise.
The depreciable amount of a depreciable asset should be allocated on a
systematic basis to each accounting period during the useful life of the asset.
The depreciation method selected should be applied consistently from
period to period