Accounting Policies Video Lecture | Principles and Practice of Accounting - CA Foundation

we now want to accounting policies what
are accounting policies actual methods
based on principles and concepts like we
mentioned before accounting policy
charging of depreciation is a principle
how to apply this principle to apply
this principle charging of depreciation
we may use the written down value method
or the straight-line method if we adopt
the straight-line method our policy for
charging of depreciation is
straight-line method we should apply
that principle use the straight-line
method year after year of the year so
they are actual methods based on
principles and concepts there may be
alternative methods and though
accounting standards have reduced the
number of alternative methods in some
cases they continue to be certain
alternative methods inventories may be
valued on a FIFO method they may be
valued on a weighted average of cost
method they may be valued under the
retail price method etc so it's largely
accounting policies different there are
alternative methods by which a principle
can be applied whether it's for
valuation of inventories method of
depreciation valuation investments etc
the accounting standard lays down being
acceptable methods the acceptable
accounting policies it so happens that
these instances there may be two or more
such methods
so there may be a choice and we may be
able to decide on the particular force
but having decided on a particular
policy we should stick to it and apply
it consistently year after year how to
decide the policy normally depends on
the characteris on three characteristics
where is prudence always our prudent
conservative can substitute the actual
nature of the transaction not so much
we are the legal aspect actual intention
and materiality so when we decide on an
accounting policy we base it on well
there are three four alternatives we
need to pick one that would depend on
three characteristics on prudence
substance and materiality prudence
substance over form and materiality
reasons for change in accounting
policies policies must be applied
consistently we cannot keep changing an
accounting policy once adopted having
said that we are allowed to change an
accounting policy may be changed under
the following circumstances we've
already discussed this before if it is
required by law under a statute if
because of some new accounting standard
in order to be complied with an
accounting standard an accounting policy
needs to be changed and if the change
will result in a better presentation of
the financial statements also we could
change the accounting points but in that
case in all these cases if we do change
in accounting policy we should disclose
the fact that there has been a change in
accounting policy from this method to
that and what is the effect on the
current profits and
your profits as a result of this change
in person