Accounts

CHAPTER 1

GAAP

About GAAP:

GAAP, the Generally Accepted Accounting Principle, are a common set of accounting rules, standards and procedures. They are used to prepare, present and report financial statements for publicly traded and privately held companies, non profit entities and federal and state governments in the United States. GAAP are not written in law, but are a combination of authoritative standards set by policy boards that help creditors, investors and auditors make better financial decisions. These decisions help the economy run more efficiently.

Below given account policies adapted by two different organisations. One is a small firm named Ajinkya Enterprises which is a transportation based firm and other is an MNC Infosys. As the size of both organisations and work done differ from each other, there are differences between accounting policies adapted by these two organisations.

S &Co Electrical Shop

Statement of Significant Accounting Policies

(For the Financial Year 2008-2009)

Method of Accounting:

The firm is following a mercantile system of accounting. There is no change in the system of accounting in the previous year.

Method of valuation of Fixed Assets:

Fixed Assets are valued at Cost less Depreciation. The opening written down value of a block of fixed assets as on 1st April 2008 is taken, to that additions if any during the year are added sales if any are deducted. From the above balance value depreciation is deducted and the closing value of fixed assets is computed.

Method of depreciation:

Depreciation is provided by reducing balance method. The rates of depreciation are prescribed by Income Tax Act 1961.

Sales Recognition:

The sales are recognized at the point of billing to the customers and dispatch of the same.

Accounts are prepared on a going concern basis.

Investments are valued at cost. The cost of improvement of the investment, which is directly attributable to is included in the...