Page 50 - CA_ELG_Volume I_ELG-Sample

1.40 Theoretical Framework Principles and Practices of Accounting Paper 1

; Revenue Expenditure – Relates to expenses incurred in regular and normal course of
business, e.g. salary, rent.

; Capital Expenditure – Relates to expenses whose benefits occur for more than one
period, e.g. buildings.

; Revenue Receipt and Capital Receipts – Receipts in normal course of business are
revenue receipts and receipts other than revenue receipts are capital receipts.

; Contingent Liability – A possible obligation resulting in possible outflow of economic
resources. Not recognised in balance sheet, disclosed as part of notes.

; Contingent Asset – A possible inflow of economic resources. Not recognised in balance
sheet, disclosed as a part of Board’s Report.

; A change in accounting policies should be made only when the following conditions are
fulfilled:

◦ Required for compliance with AS or statue.

◦ Change would result in more appropriate presentation of financial statement.

; Money is “volatile” as a measurement scale. Money is not stable in the dimension as a
unit of measurement

; There are various valuation principles: Historical cost, current cost, present value and
realisable value.

; Accounting standards deal with recognition measurement, presentation, disclosure of
the financial information. The objects of AS are to —

◦ Improve the reliance placed on FS (by providing means for comparable financial
information).

◦ Establish standard accounting policies, valuation norms and disclosure require-
ments.

; Significance of issue of Ind AS is that there is a need for the standards to be in
convergence with IFRS. This leads to benefit for —

◦ Economy – As it leads to inflow of foreign funds.

◦ Investors – More reliable and comparable information is available.

◦ Industry – High confidence among investors, lower financial reporting burden.

Copyright © Veranda Learning Solutions | www.verandalearning.com/ca