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    Accounting Standard 5 (AS 5) Profit or Loss For The Period Prior of Changing Accounting Policies

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    Vinoth Kannan
    This document summarizes several Indian accounting standards (AS): AS 5 discusses disclosure requirements when accounting policies change, including ordinary/extraordinary items affecting profit/loss before and after the change. AS 6 covers depreciation accounting rules for fixed assets. AS 7 addresses accounting for long-term construction contracts that span multiple periods. AS 8 concerns research and development cost accounting, including calculating R&D costs and amortizing them over expected benefit periods.

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    Accounting Standard 5 (AS 5) Profit or Loss For The Period Prior of Changing Accounting Policies

    Uploaded by

    Vinoth Kannan
    73 views3 pages
    This document summarizes several Indian accounting standards (AS): AS 5 discusses disclosure requirements when accounting policies change, including ordinary/extraordinary items affecting profit/loss before and after the change. AS 6 covers depreciation accounting rules for fixed assets. AS 7 addresses accounting for long-term construction contracts that span multiple periods. AS 8 concerns research and development cost accounting, including calculating R&D costs and amortizing them over expected benefit periods.

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    2.AS 5-8

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    This document summarizes several Indian accounting standards (AS): AS 5 discusses disclosure requirements when accounting policies change, including ordinary/extraordinary items affecting profit/loss before and after the change. AS 6 covers depreciation accounting rules for fixed assets. AS 7 addresses accounting for long-term construction contracts that span multiple periods. AS 8 concerns research and development cost accounting, including calculating R&D costs and amortizing them over expected benefit periods.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    73 views3 pages

    Accounting Standard 5 (AS 5) Profit or Loss For The Period Prior of Changing Accounting Policies

    Uploaded by

    Vinoth Kannan
    This document summarizes several Indian accounting standards (AS): AS 5 discusses disclosure requirements when accounting policies change, including ordinary/extraordinary items affecting profit/loss before and after the change. AS 6 covers depreciation accounting rules for fixed assets. AS 7 addresses accounting for long-term construction contracts that span multiple periods. AS 8 concerns research and development cost accounting, including calculating R&D costs and amortizing them over expected benefit periods.

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    5.

    Accounting standard 5 ( AS 5)
    Profit or loss for the period prior of changing accounting
    policies:-

    ICAIs this standard explains two simple rules


    1. All ordinary and extraordinary item relating to the financial statement should be disclosed
    if it effects on profit or loss period before changing of accounting policies.
    2. If accounting policies are changed. Then it is the duty of enterprise to disclose all
    important items relating to income and expenditures, so that profit or losses before the
    period and after period of changes of accounting policies can easily compare with other
    enterprises business.

    6. Accounting standard 6 (AS 6 )


    Accounting of Depreciation

    Accounting standard 6 explains rules and regulations regarding charging ofdepreciation on


    any fixed asset . These rules can be explained in following way.
    1. Depreciation must be charged on fixed assets which is used in business for more than
    one year .
    2. Depreciation should charge with consisted method of charging depreciation. Two famous
    method of charging depreciation are straight line and reducing balance method.
    3. Rate of depreciation should be according to company law 1956 and if it is not written in it
    then companies are free to charge depreciation with appropriate rate of depreciation.
    4. Any company can also change the method of charging depreciation. But its effect in the
    form of deficiency or surplus also should show in profit and loss account of business .
    5. Deficiency due to changing the method of depreciation will be debited in profit and loss

    account and surplus due to changing the method of depreciation will be credited in profit
    and loss account of business.

    7. Accounting standard 7 ( AS 7 )
    Accounting of construction contracts

    Construction contracts are those contracts relating to build of dam, building, pipelines, ships
    and other fixed assets. The nature of business is different from business of general
    manufacturing. Because time of completing contract is more than the time of accounting
    period. So, ICAI makes some rules and regulation that should be adopt in the business
    relating to construction.
    1. Construction Company should identify all their resources of revenue. It may be fixed at
    the time of contract or it may be cost plus profit basis. So, it is necessary to make contract
    account statement in which all revenue of construction business must be shown.
    2. Costs of contract comprise all raw material labour and other expenses which incurred for
    completing of contact. These costs should also calculate and deduct from revenue for
    calculating net earning from each contract.

    8. Accounting standard 8 (AS 8)


    (Accounting for research and development)

    Research and development is important department of any company. AS 8 cares its


    accounting treatment and related to calculate its proper cost and charging on profit and loss
    account.
    Ist part
    Calculate the cost of research and development with following formula

    = Cost of raw material used in research and development + Cost of wages and
    salaries of employees working in this department +depreciation of assets used in
    this department + amortization cost of patents and licenses + other related cost

    2nd part
    This part is related to charge the written off proportion to profit and loss account. For this
    companys accountant should see what will company gets future benefits and how many
    years will company get these profits. On this estimation, company will charge written off
    cost to debit side of profit and loss account and rest amount of deferred expenditure of
    research and development will be shown in balance sheets asset side under miscellaneous
    expenditures .
    related : Accounting Standards in India Simple Explanation - Part one (AS 1 to AS 4 )

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