Accounting Standard 1: Disclosure of accounting policies.

AS 1 Disclosure of accounting policies is mandatory in nature.
Accounting policies means the specific principles/treatments and the methods of applying these principles/treatments  for the preparation and presentation of financial statements.
   Examples:
                  How to charge Depreciation.
                  Treatment of borrowing costs.
                  Treatment of lease.
                  Treatment of investments. etc
Now let us discuss what AS 1 Disclosure of accounting policies says:

1. All accounting policies which are significant in preparation and presentation of financial statements should be disclosed at one place.
2. Selection of accounting policy:
   a)   When ever any accounting policy has to be selected then primary condition should be "True and fair view" of financial statements, it means that those accounting policies should be selected in preparation and preparation of financial statements which give the "True and fair view" of financial statements.

          b)    Secondary Conditions:

               i)    Prudence principle should be followed which can also be referred to as Conservatism. It means those policies should be selected which will provide foll all the losses immediately as and when they are incurred but will provide for profits only after they are actually earned.

               ii)    Substance over form: It means importance should be given to actual transaction and not the legal form of transaction.

              iii) Materiality: It means accounting policies should be framed for material items only. items which are immaterial should be written off instantly.

Fundamental Accounting Assumptions

Fundamental Accounting assumptions are those assumptions which are generally assumed and are necessary for preparation for the preparation of financial statements. Fundamental Accounting assumptions need not to be disclosed if they are followed however if they are not followed the same should be disclosed.

Three Fundamental Accounting assumptions are:

1. Going Concern:-  It means it is generally assumed that the business will carry on forever and there is no need for its liquidation or close down the operations.
2. Accrual:               It means recording of income and expenditure on time period basis irrespective of the actual payment/receipt.
3. Consistency:-       It means that all accounting p;policies and treatments will be consistently followed by the entity.    

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