Q.1 Uncertainties inevitable surround many transaction.

This should
be recognized by exercising prudence in preparing financial
statement. Explain this concept with the help of an example.
Ans. Financial Statements are used to find the financial health of a company or of an individual.
There are two basic statements to be considered. The Statement is simply Assets less
liabilities.
In the example picture I have listed all of the Assets, which in include your house, 401k, car,
savings, and furniture. I then listed the accounts that are owed, including house, car, and
Visa.
Add up all of the Assets. Add up all of the Liabilities. Subtract the Liabilities from the Assets
and you have the Net Worth. A positive net worth means you have more assets than you
have
debts. This is a good thing. A negative net worth means you have more debts than you have
things of worth. Not so good.
A business uses several accounting reports to keep track of its assets. These reports include
the
balance sheet, income statement, retained earnings Statement and statement of cash flows.
Businesses rely on these reports for many reasons which include finding out whether or not the
company is profitable, where a company is spending its capital, and what the total value
of the company is. Companies also use these reports for planning for the future. One of the
most
important reports is the balance sheet. The balance sheet provides a snapshot of the
company¶s
assets and liabilities on the final day in a given period the balance sheet really has three
different sections such as assets, liabilities and the owner¶s equity. Another report widely
regarded as important in a business is the income statement. Another common financial
statement is the statement where you list all of your income and then all of your expenses. This
can be for a week, month, or year. In the example shown I'm using monthly increments. You will
note that in the month of Feb the Property Tax bill is due which drives the Net Cash Flow
negative. But the months of Jan and Mar are positive, so money will have to be managed from
these months to fill the gap in Feb. Again, if the Net Cash Flow is positive you are in good
shape. If negative, you must increase your income or decrease your expenses to bring it back
in
balance.
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 · General ledger preparation
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Q.2 (A) When is the change in accounting policy recommended and
what are the disclosure requirement regarding the change in
accounting policy?
(B) Explain IFRS.
Ans. (A)Accounting Policy
Accounting policies are the specific principles, bases, conventions, rules and practices applied by
an entity in preparing and presenting financial statements.
If refers to specific accounting principles and methods of accounting adopted by the
enterprise while preparing and presenting the financial statement. The management of each
enterprise has to select appropriate accounting policies based on the nature and
circumstances of the business they are in. some of the areas in which different accounting
policies may be adopted are:-

 Treatment of expenditure during construction,

 Methods of depreciation, amortization,

 Conversion or translation of foreign currency items,

 Valuation of inventories,

 Valuation of investments,

 Treatment of goodwill,

 Valuation of fixed assets,

 Recognition of profit on long-term contract and

 Treatment of contingent liabilities.

A change in accounting estimate is an adjustment of the carrying amount of an asset or
liability, or related expense, resulting from reassessing the expected future benefits and
obligations associated with that asset or liability.
Change in Accounting Policies:-
The change in accounting policy is recommended only in the following circumstances²
 If is required by statute for compliance with an accounting standard
 If is considered that the change would result in a more appropriates presentation of the
financial statements of an enterprise.
Disclosure in case of change in Accounting Policy:-
 If change has a material effect in current period and the effect of change is ascertainable the
amount of change should be disclosed.
 If change has no material effect in current period but which is reasonably accepted to have a
material effect in later periods, the fact of such change should be appropriately disclosed.
 If the change has a material effect in current period and the effect of change is not
ascertainable wholly or in part, the fact should be disclosed.
(B) IFRS (International Financial Reporting System)
International Accounting Standards Board (IASB) that companies and organizations can
follow
when compiling financial statements. The creation of international standards allows investors,
organizations and governments to compare the IFRSsupported financial statements with
greater
ease. Over 100 countries currently require or permit companies to comply with IFRS
standards. The International Financial Reporting Standards were previously called the
International Accounting Standards (IAS). Organizations in the United States are required to
use
the Generally Accepted Accounting Principles (GAAP).
Objective:-
The main objective of IFRS are-----
1) To develop in public interest, a single set of high quality, understandable and enforceable
global accounting standards that require high quality, transparent and comparable information
in
financial statement.
2) To promote the use and rigorous application of those standards.
3) In fulfilling the objectives associated above to take account of, as appropriate, the special
needs of small & medium-sized entities & emerging economies.
4) It should also provide the current financial status of the entity to all the users of financial
information.