ACCOUNTING POLICIES :

Accounting policies refer to the specific accounting principles and the methods of applying those principles adopted by the enterprise in the preparation and presentation of financial statements. Policies are based on various accounting concepts, principles and conventions.

The accounting standards issued by professional accounting bodies limit and reduce alternatives out of which accounting policies are to be selected by an enterprise for measurement and reporting of business transactions. Thus, the specific accounting policies are selected by an enterprise in conformity with generally accepted accounting principles and the accounting standards. For example, as per matching concept, depreciation should be treated as cost of doing business and matched with revenue of the same period. As per Accounting Standard-6 depreciation can be calculated by straight line method, written down value method etc. So, the organization has to make a policy as to which method it wants to follow. Similarly, valuation of inventory, treatment of goodwill, valuation of investments, valuation of fixed assets etc. are the significant areas which require standardization of accounting policies to ensure relevance and reliability of accounting information. IFRS are not implemented but soon we have new Accounting Standard as ‘Ind AS’ as convergence of IFRS.