SMT.P.D.HINDUJA SMT.P.D.HINDUJA TRUST’STRUST’S

K.P.B.HINDUJA COLLEGE OF COMMERCE

FY BAFFY BAF

2011-20122011-2012

FINANCIAL ACCOUNTINGFINANCIAL ACCOUNTING

ACCOUNTING STANDARDS6 &10BY GROUP NUMBER :03 NAMENAMEDIVYA RANAVATDIVYA RANAVATDIVYA DADHEECHDIVYA DADHEECHEKTA MANIKEKTA MANIKRUTUJA CHUDNAIKRUTUJA CHUDNAIKPOULAMI SARKARPOULAMI SARKARRUSHABH RUSHABH

CHANDANCHANDAN

ROLL NO.ROLL NO.

1414

1616

1717

1919

2020

2424

INTRODUCTIONAn accounting standard is a guideline for An accounting standard is a guideline for

financial accounting, such as how a firm financial accounting, such as how a firm prepares and presents its business prepares and presents its business

income and expense, assets and income and expense, assets and liabilities. liabilities. 

ACCOUNTING STANDARDS IN INDIA ARE ACCOUNTING STANDARDS IN INDIA ARE ISSUSED BY INDIAN INSTITUTE OF ISSUSED BY INDIAN INSTITUTE OF CHARTERED ACCOUNTANTCHARTERED ACCOUNTANT (ICAI).(ICAI).

Applicability of accounting standards

NON CORPORATE ENTITIESNON CORPORATE ENTITIES

CO-OPERATIVE SOCITIESCO-OPERATIVE SOCITIES

CHARITABLE ENTITIESCHARITABLE ENTITIES

PARTNERSHIP & PROPRIETORSHIPPARTNERSHIP & PROPRIETORSHIP

COMPANIESCOMPANIES

SMALL & MEDIUM COMPANIESSMALL & MEDIUM COMPANIES

ENTERPRISESENTERPRISES

OBJECTIVES OF ACCOUNTING OBJECTIVES OF ACCOUNTING STANDARDSTANDARD

Is to standardize the diverse accounting policies & Practices with a view to eliminate to the extent possible the non- comparability of financial Statement and add the reliability to the financial statements. The Institute of Chartered Accountant of India, recognizing the need to harmonize the Diverse accounting policies and practices, constituted an Accounting Standard Board (ASB) on 21st April, 21st April, 1977. 1977.

 

Fixed assetsFixed assets, also known as a non-current asset or Fixed assets, also known as a non-current asset or

as property, plant, and equipment (PP&E), is a term as property, plant, and equipment (PP&E), is a term used in used in accounting for assets and property which cannot easily be converted into cash. This can be compared with current assets such as cash or bank accounts, which are described as liquid assets. In most cases, only tangible assets are referred to as fixed.

EXAMPLES OF FIXED ASSETS1.1. LANDLAND2.2. BUILDING - FREEHOLDBUILDING - FREEHOLD3.3. LEASEHOLD – BUILDINGLEASEHOLD – BUILDING4.4. PLANT AND MACHINERYPLANT AND MACHINERY5.5. FURNITURE AND FITTINGSFURNITURE AND FITTINGS6.6.   FIXTURES AND FITTINGSFIXTURES AND FITTINGS7.7. COMPUTERSCOMPUTERS8.8. OFFICE EQUIPMENTSOFFICE EQUIPMENTS9.9. MOTOR VEHICLESMOTOR VEHICLES

THE METHOD OF ACCOUNTING FOR THE METHOD OF ACCOUNTING FOR FIXED ASSET INCLUDED @HISTORICAL FIXED ASSET INCLUDED @HISTORICAL

COST & REVALUED COST.COST & REVALUED COST. COMPONENTS OF COST: COST COMPRISES ITS COST COMPRISES ITS PURCHASE PRICEPURCHASE PRICE & ANY & ANY

ATTRIBUTABLE COSTATTRIBUTABLE COST OF BRINGING THE ASSET TO OF BRINGING THE ASSET TO ITS WORKING CONDITION FOR ITS USE.ITS WORKING CONDITION FOR ITS USE.

SELF CONSTRUCTED FIXED ASSETS: COMPRISES OF.

1.DIRECT ATTRIBUTABLE OVERHEADS1.DIRECT ATTRIBUTABLE OVERHEADS 2.GENERAL & ADMINISTRATIVE OVERHEADS2.GENERAL & ADMINISTRATIVE OVERHEADS

NON – MONETARY CONSIDERATION: A non-monetary consideration includes A non-monetary consideration includes

providing services, transferring tangible and providing services, transferring tangible and intangible property or any similar dealings.intangible property or any similar dealings. The dealing may be a barter, swap, bonus or The dealing may be a barter, swap, bonus or discount, or any type of similar agreement.discount, or any type of similar agreement.

IMPROVEMENT & REPAIRS :IMPROVEMENT & REPAIRS : The word The word ‘repairs’‘repairs’ ordinarily means the ordinarily means the

remedying or making good of defects in, remedying or making good of defects in, damage to, or deterioration of, the damage to, or deterioration of, the property to be repaired and contemplates property to be repaired and contemplates the continued existence of the property .the continued existence of the property .

Improvement - Its early spelling was Improvement - Its early spelling was emprowementemprowement, meaning , meaning "profit, profitable "profit, profitable use or management."use or management."

The process of getting better.The process of getting better.Examples: 1) There is no improvement in Examples: 1) There is no improvement in

the cash flow situation. 2) Sales are the cash flow situation. 2) Sales are showing a sharp improvement over showing a sharp improvement over last year. 3) Employees have noticed an last year. 3) Employees have noticed an improvement in the working environment. improvement in the working environment.

AMOUNT SUBSITUTED FOR HISTORICAL AMOUNT SUBSITUTED FOR HISTORICAL COSTCOSTFIRST TIME REVALUATION (UPWARD):FIRST TIME REVALUATION (UPWARD): “ “CREDITED TO REVALUATION RESERVES”CREDITED TO REVALUATION RESERVES”FIRST TIME REVALUATIOM (DOWNWARD):FIRST TIME REVALUATIOM (DOWNWARD):

“ “CREDITED TO PROFIT AND LOSS A/C.”CREDITED TO PROFIT AND LOSS A/C.”

RETIREMENT AND DISPOSAL:RETIREMENT AND DISPOSAL: Material items retired from active use & held for Material items retired from active use & held for

disposal.disposal. Losses/gains arising from retirement & disposal Losses/gains arising from retirement & disposal

of fixed assets.of fixed assets. On disposal of previously revalued item of fixed On disposal of previously revalued item of fixed

asset.asset.

VALUATION OF FIXED ASSETS IN SPECIAL VALUATION OF FIXED ASSETS IN SPECIAL CASES:CASES:

InIn finance, finance, a revaluation of fixed assets is a a revaluation of fixed assets is a technique that may be required to accurately technique that may be required to accurately describe the true value of the capital goods a describe the true value of the capital goods a business owns. business owns. The purpose of a revaluation is to The purpose of a revaluation is to bring into the books the fair market value of bring into the books the fair market value of fixed assets. This may be helpful in order to fixed assets. This may be helpful in order to decide whether to invest in another business. decide whether to invest in another business.

FIXED ASSETS OF SPECIAL TYPES: FIXED ASSETS OF SPECIAL TYPES: GOODWILL.GOODWILL.

Goodwill should be recorded in the books only Goodwill should be recorded in the books only when some when some consideration in money or money’s worthconsideration in money or money’s worth has been paid for it.has been paid for it.

The following information should be disclosed in The following information should be disclosed in the financial statements :the financial statements :

Gross and net book values of fixed assets at the Gross and net book values of fixed assets at the beginning and end of an accounting period….beginning and end of an accounting period….

Expenditure incurred on account of fixed Expenditure incurred on account of fixed assets…assets…

Revalued amounts substituted for historical Revalued amounts substituted for historical costs of fixed assets ……costs of fixed assets ……

DisclosureDisclosure

INTRODUCTIONINTRODUCTION..

DEFINITION.DEFINITION.

Used during more than one accounting period.

Have a limited useful life.

Held by an enterprise for production and supply of goods.

Regenerative natural resources.

Wasting assets. Intangible assets. Research and development Live stock. Land.

STRAIGHTLINE METHOD.STRAIGHTLINE METHOD. REDUCING BALANCE METHOD.REDUCING BALANCE METHOD. ANNUITY METHOD. ANNUITY METHOD. SUM OF THE DIGITS METHODSUM OF THE DIGITS METHODDEPRECIATION METHODDEPRECIATION METHODINSURANCE POLICY METHODINSURANCE POLICY METHODREVALUATION METHODREVALUATION METHODDEPLITION METHODDEPLITION METHODMACHINE HOUR RATE METHODMACHINE HOUR RATE METHODREPAIRS PROVISION METHODREPAIRS PROVISION METHOD

RETROSPECTIVE CHANGE.

PROSPECTIVE CHANGE.

Expected physical wear and tear;

Obsolescence; Legal or other

limits on the use of the asset;

Experience.

EXAMPLESEXAMPLES

PLANT AND MACHINERY HAS USEFUL PLANT AND MACHINERY HAS USEFUL LIFE OF 10 YEARS, DEPRECIATION LIFE OF 10 YEARS, DEPRECIATION COST FOR 1 YEAR IS 40 LAKH. AFTER 6 COST FOR 1 YEAR IS 40 LAKH. AFTER 6 YEARS, COMPANY REALISE THE PLANT YEARS, COMPANY REALISE THE PLANT HAVE 2 MORE YEARS ONLY.HAVE 2 MORE YEARS ONLY.

CALCULATION FROM 7CALCULATION FROM 7THTH YEAR IS AS YEAR IS AS FOLLOWSFOLLOWS –

40 - 40/10 * 6 8

=2 LAKHS.

Depreciation methods used. Depreciation rates or the useful lives of the assets, if they are different from the principal rates specified in the statute governing the enterprise.

The historical cost or other amount substituted for historical cost .

Total depreciation for the period for each class of assets.

The related accumulated depreciation.

REFERENCEREFERENCEInvestopediaInvestopedia    Google searchGoogle searchTAXMANN Accounting TAXMANN Accounting

standardsstandardsICAI BOOKS.ICAI BOOKS.