chapter1- unit5-9


accounting terminology
Vijaya Raikode
Flashcards by Vijaya Raikode, updated more than 1 year ago
Vijaya Raikode
Created by Vijaya Raikode over 1 year ago

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Question Answer
Contingent Asseet A possible asset arises from past events and their existence will be confirmed only after occurrence or non-occurrence of one or more uncertain future events.
Contingent Liability A possible obligation arising from past events and may arise in future depending on the occurrence or non- occurrence of one or more uncertain future events.
A contingent asset need are disclosed in the financial statements or not ? if not then where it is disclosed ? No, A contingent asset is usually disclosed in the report of the approving authority (Board of Directors in the case of a company, and the corresponding approving authority in the case of any other enterprise), if an inflow of economic benefits is probable.
The distinction between a liability and a contingent liability a contingent liability is generally based on the judgement of the management.
Provision means “any amount written off or retained by way of providing for depreciation, renewal or diminution in the value of assets or retained by way of providing for any known liability of which the amount cannot be determined with substantial accuracy”.
Accounting Policies Accounting Policies refer to specific accounting principles and methods of applying these principles adopted by the enterprise in the preparation and presentation of financial statements.
The areas wherein different accounting policies are frequently encountered can be given as follows: (1) Valuation of inventories; (2) Valuation of investments.
Three major characteristics which should be considered for the purpose of selection and application of accounting policies. viz., Prudence, Substance over form, and Materiality.
A change in accounting policies should be made in the following conditions: (a) It is required by some statute or for compliance with an Accounting Standard. (b) Change would result in more appropriate presentation of financial statement.
Any measurement discipline deals with three basic elements of measurement viz., identification of objects and events to be measured, selection of standard or scale to be used, and evaluation of dimension of measurement standards or scale.
Prof. R. J. Chambers defined ‘measurement’ as (R.J. Chambers, Accounting Evaluation and Economic Behaviour, Prentice Hall, Englewood Cliffs, N.J. 1966, P.10). “assignment of numbers to objects and events according to rules specifying the property to be measured, the scale to be used and the dimension of the unit”.
Ordinal numbers, or ordinals Ordinal numbers, or ordinals, are numbers used to denote the position in an ordered sequence: first, second, third, fourth, etc.,
cardinal number a cardinal number says ‘how many there are’: one, two, three, four, etc.
According to this definition, the three elements of measurement are: (1) Identification of objects and events to be measured; (2) Selection of standard or scale to be used; (3) Evaluation of dimension of measurement standard or scale.
There are four generally accepted measurement bases or valuation principles. These are: (i) Historical Cost; (ii) Current Cost; (iii) Realizable Value; (iv) Present Value.
Historical Cost: According to this base, assets are recorded at an amount of cash or cash equivalent paid at the time of acquisition.
Current Cost: Assets are carried out at the amount of cash or cash equivalent that would have to be paid if the same or an equivalent asset was acquired currently. Liabilities are carried at the undiscounted amount of cash or cash equivalents that would be required to settle the obligation currently.
Realisable Value: As per realisable value, assets are carried at the amount of cash or cash equivalents that could currently be obtained by selling the assets in an orderly disposal.
Present Value: As per present value, an asset is carried at the present discounted value of the future net cash inflows that the item is expected to generate in the normal course of business.
Accounting standards deal with the issue of : Recognition of events and transactions Measurement of transactions and events Presentation of transactions and events Disclosure requirement
Accounting standards Accounting standards are written policy documents issued by the expert accounting body or by the government or other regulatory body covering the aspects of recognition, measurement, presentation and disclosure of accounting transactions and events in the financial statements.
OBJECTIVES OF ACCOUNTING STANDARDS (i) eliminate the non-comparability of financial statements and thereby improving the reliability of financial statements; and (ii) provide a set of standard accounting policies, valuation norms and disclosure requirements.
Indian Accounting Standards 1.Convergence towards Global Standards 2. Transparency of financial statements 3. Comparability of financial statements 4. Enhanced Disclosure requirements
BENEFITS OF CONVERGENCE WITH IFRSs 1.The Economy 2. Investors 3. The Industry
IFRSs International Financial Reporting Standards
International Financial Reporting Standards (IFRSs) are considered a "principles-based" set of standards.
Indian Accounting Standards (Ind-AS) Indian Accounting Standards (Ind-AS) are International Financial Reporting Standards (IFRS) converged standards issued by Central Government of India under supervision and control of Accounting Standards Board (ASB) of ICAI and in consultation with National Advisory Committee on Accounting Standards (NACAS).
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