Question

what key accounting policies are and how to select them

Answer 1

Accounting policies:

Accounting policies are usually set of principles standards & procedure's a company implements in preparing it's financial statements & for decision making.These policies may vary from company to company .

Key Accounting policies:

Revenue recognition:

Revenue is very important for company. According to this policies revenue to be recognised only when it is earned.

Expense recognition:

For running a business company incurs expenses. As per this policy expenses incurred in finance year are treated as that years expenses.

Assets & liability :

A company should maintain a record of its assets & liabilities. It should provide them in balance sheet. Assets may be short term or long term. Fixed assets should economic source to the company.

Selection of Accounting policies may depends on nature business of the company.

selection of Accounting policies may be done on basis of following concepts:

Substance over form:

Accounting & preparation of Financial statements should be governed by there substance but not merely by legal form

Prudence:

All anticipated losses should be recognised by making provision .expected profits should be recognised when they occur.

Materiality:

Financial statements should disclose all material information.material information is the information the presence of which will influence the users of financial statements.