Accounting Standards Covering Topics AS 5
Net Profit or Loss For the Period
Prior Period Items
Changes in Accounting Policies
Changes In Accounting Policies
Net Profit Or Loss For the Period
Under the Financial Statements, we cover the Profit and Loss Account, Balance Sheet and Cash Flow Statements. But mostly AS 5 is deal with P/L Account Only. Accounting Standards AS 5 is working to provide a true and fair view of profit and loss account which is related to AS 1 ( Disclosure of Accounting Policies).
Net Profit or Loss For the Period:- These are classified into two categories like Ordinary Items and Extraordinary Items.
Ordinary Activities:– The products which are used in the Ordinary Course of Business are related to ordinary Items.
Example:– Selling of TV for TV Enterprises.
Selling of Furniture for Furniture Making Enterprises.
Extra Ordinary Items:- Income and Expenses are arising these events and transactions clearly distinctions from the ordinary Items from the business. not expected for recurring business.
Note:- All the Extra Ordinary Items are disclosed each and every transaction separately in the Profit and Loss Account.
Prior Period Items
Mostly the Prior Period Items are related to Errors and Omissions.
Errors:- An error that occurred during the past year will be considered in the Present year in order to show the true and fair view of Financial Statements.
For Example- X Trader forgets to record Bad debts of Rs 10000 in the Year 2011. Still, it is showing Rs 10000 as Debtor in the Year 2018. In the present, we should Conclude the Statement in Profit and Loss Account Related to the Event by taking Appropriate Measures.
Omissions:- Any transactions or Events which are forgotten by the Accountant will be recorded in the Financial Statement.
Accounting Policy:– Accounting Policy are the Principles which firm or Company Has to Follow year and Year. They may change the Accounting method as per the three Conditions that can change the Accounting Conditions.
To Change Accounting Policy Conditions
- If Accounting Standard Recommended to Change the Accounting Policies.
- Any Law, Statue or Government requires changing the Accounting Policies.
- More Livery Condition Due to These Changes present Financial Statement will show better than our earlier statement.
Accounting Estimates: Accounting Estimates are changes from Enterprises to Enterprises.
For Example– X buy the Machine For 5 Lakhs and estimate the Lifetime of the asset is 5 Years. Y Buy the machine For 5 Lakhs and estimate the lifetime of the asset for 3 Years. So, These may vary from firm to firm.