PURPOSE: PURPOSE To facilitate better understanding of financial statements. To facilitate meaningful comparison between financial statements of different enterprises.
MEANING OF ACCOUNTING POLICIES : MEANING OF ACCOUNTING POLICIES Specific accounting principles. Methods of applying those principles adopted by the enterprise. In prepration of financial statements.
AREAS ENCOUNTERED : AREAS ENCOUNTERED Treatment of Goodwill Valuation of Inventories Valuation of Investments Valuation of Fixed Assets Methods of Depreciation Treatment of retirement benefits Treatment of Contingent Liabilities
CONSIDERATIONS IN THE SELECTION OF ACCOUNTING POLICIES: CONSIDERATIONS IN THE SELECTION OF ACCOUNTING POLICIES PRIMARY CONSIDERATION The financial statements prepared & presented on the basis of such accounting policies should represent a true and fair view of the state of affairs of the enterprise.
CONSIDERATIONS IN THE SELECTION OF ACCOUNTING POLICIES: CONSIDERATIONS IN THE SELECTION OF ACCOUNTING POLICIES SECONDARY CONSIDERATION Prudence Substance Materiality
FUNDAMENTAL ACCOUNTING ASSUMPTIONS: FUNDAMENTAL ACCOUNTING ASSUMPTIONS GOING CONCERN CONSISTENCY ACCRUAL These are not specifically stated in the financial statements. Their acceptance and usage is assumed .
DISCLOSURE OF ACCOUNTING POLICIES: DIS CLOSURE OF ACCOUNTING POLICIES All significant accounting policies adopted should be disclosed. The disclosure should form part of the financial statements. Any change in the accounting policies which has a material effect in the current period should be disclosed along with amount of effect. If the fundamental accounting assumptions is not followed , the fact should be disclosed.