लेखांकन मानक (एएस) 1, 2 और 9

• These notes summarize key aspects of Accounting Standards (AS) 1, 2, and 9, as mentioned in the provided text.

AS 1: Disclosure of Accounting Policies

• Issued by the Institute of Chartered Accountants of India (ICAI).
• Deals with the disclosure of significant accounting policies followed in preparing and presenting financial accounts.
• Mandatory for all concerns.
• Disclosure of policies helps understand a company's financial position and profit/loss.
• Accounting policies refer to specific accounting principles and the methods of applying them.
• Areas where different accounting policies may be adopted include:
• Methods of depreciation
• Valuation of stock
• Treatment of goodwill
• Valuation of investments
• Treatment of retirement benefits
• Valuation of fixed assets
• A concern should select accounting policies that present a true and fair view of the balance sheet and profit/loss for the period.
• Rules for disclosure:
• All significant accounting policies adopted should be disclosed.
• Disclosure should form part of the financial accounts.
• All policies should be disclosed in one place.
• Key feature: All significant accounting policies adopted in the preparation should be disclosed.
• Final accounts should be disclosed.
• Any change in accounting policies should be disclosed.
• Accounting policies should be disclosed in one place.

AS 2: Valuation of Inventories

• Issued by ICAI.
• Deals with the valuation of inventories.
• Inventory is defined as assets held for sale in the course of business, in the process of production, or in the form of materials or supplies to be consumed in the production process.
• Inventories cover goods purchased for resale, finished goods, and raw materials.
• Valuation of stock means the estimated selling price in the course of business less the estimated cost of completion in work in progress and estimated cost of making the sale.
• Net Realisable Value is the estimated selling price in the course of business less the estimated cost of completion in work in progress and estimated cost of making the sale.
• AS 2 requires the following disclosures:
• The accounting policies adopted in measuring inventories, including the cost formulas used.
• The total amount of inventory and its classification (e.g., raw materials and components).
• Includes work in progress.
• Includes finished goods.
• Includes stock and spares.
• Includes stores and spares.
• Includes loose tools.
• Features of AS 2:
• AS 2 applies to the valuation of all inventories except work-in-progress, shares, debentures, etc.
• The cost of inventories of items that are not ordinarily interchangeable or produced for specific projects should be assigned by specific identification of their individual costs.
• The cost of other interchangeable inventories should be assigned by using the First-In, First-Out (FIFO) or weighted average cost method.

AS 9: Revenue Recognition

• Deals with recognition of revenue in the profit/loss account of a concern.
• Income may be from the sale of goods or fees from services, interest or dividends.
• Mandatory for accounts whose period begins on or after April 1, 1999.
• Revenue means the amount earned from customers for goods sold, services given, or for use of funds of assets.
• AS 9 does not deal with revenue arising from construction contracts, hire purchase or lease agreements, government grants or subsidies, and insurance contracts.
• The key issue is the timing of revenue recognition (when the income should be booked/credited to the profit and loss account).
• According to AS 9, royalty (charge for the use of assets such as know-how, patents, trademarks, and copyrights) accrues and is booked as per the terms of the relevant agreements.
• According to AS 9, dividends (reward from investment in shares) are booked when the right to receive payment is established.
• Features of AS 9:
• Revenue should be recognised as follows:
• Interest should be recognised on a time proportion basis, taking into account the principal outstanding.
• Royalties should be recognised on an accrual basis in accordance with the terms of the relevant agreement.
• Dividends should be recognised when the right to receive the dividend payment is established.
• Revenue should be recognised only when no significant uncertainty exists regarding the amount of the consideration that will be derived and its ultimate collectability.