Define the ‘Accounting policies’. What are the major areas in which different accounting policies may be adopted different enterprises?

Auditing and Assurance Revision Questions and Answers

Answer
Accounting policies refer to the specific accounting principles and the methods of applying those principles adopted the enterprises in the preparation and presentation of financial statements. There is no single list of accounting policies which are applicable to all circumstances. The different circumstances in which enterprises operate in a situation of diverse and complex economic activity make alternative accounting principles and methods of applying those principles acceptable. The choice of the appropriate accounting principles and methods of applying those principles in the specific circumstances of each enterprise calls for considerable judgment the management of the enterprises.
There are various areas where different accounting policies may be adopted as per need of the enterprises like:
– Method of depreciation, depletion and amortization,
– Treatment of expenditure during construction
– Conversion or translation of foreign currency items
– Valuation of inventories
– Treatment of retirement benefits
– Treatment of contingent liabilities
– Treatment of goodwill



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