Accounting policies-financial statement, Financial Accounting

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Accounting policies

Accounting policies are the specific assumptions, bases, principles and practices that are adopted by firms in preparing financial statements. The standard requires that companies follow the policies consistently from one financial period to the next.

A company should be guided by accounting standards or the current practices in choosing and applying accounting policies. The standard allows firms to change their accounting policies when;

  • There is new standard
  • The change is required by the law
  • The new change will result in a fair presentation of the financial performance and position.

 

When a company changes its policies, then the change should be accounted for respectively i.e. the previously reported financial statements should be adjusted/restated to reflect the new policy for comparison purposes.


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