Re: Method of Accounting

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

30 January 2010 Dear all,

Can we change the method of accounting from cash to mercantile or vice a versa if yes please tell the procedure.

Also can we change the method of accounting for a pvt. ltd. company.

pl. tell the solution.

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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30 January 2010 As per AS-1 the changes in accounting policy can be made in following conditions

1.Policy required by statue or compliance
2.Result of change in more appropriate presentation of financial statement

If such change affect the affairs of Balance sheet,Profit & Loss account that change should be disclosed in financial statement

Kamlesh Chokhani

Kamlesh Chokhani (Expert)
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30 January 2010 Further to add that

Accrual basis is one of the accounting assumptions mentionesd in AS-01 which is to be followed in preparation of financial statements.

AS-1 ( Para-27)- AS-1 is mandatory for company

Subsequently, however, the Council decided that these standards should be mandatory for certain enterprises, viz., Sole proprietary concerns, Partnership firms, Societies registered under the Societies Registration Act, Trusts, Hindu undivided families, and Associations of persons, only in respect of accounts for periods commencing on or after 1.4.1993. The Announcement made by the Council in this regard is reproduced hereafter (See Announcement III). This Announcement was partially modified by the Announcement published in the January, 1994 issue of â€˜The Chartered Accountantâ€™ (See Announcement V). Further, in this regard, the Council issued an Announcement on applicability of accounting standards in the context of section 44AB of the Income Tax Act (See Announcement VI). Also, subsequently, an Announcement on applicability of accounting standards to Charitable and/or Religious Organisations has been issued (See Announcement VIII). Further, a Clarification, namely, General Clarification (GC) - 12/2002 on applicability of accounting standards to Co-operative Societies has been issued (See Announcement XVI).

In the case of a company ( or for others as mentioned above), members should qualify their audit reports in case â€“

accounts have not been prepared on accrual basis

so in my opinion accounts should be prepared for most of the enterprises on accrual basis ( except cash flow)

Change from Cash flow to Accrual. opening balance sheet( for which comparative figures required) to be restated based on accrual basis and necessary adjustment may me made.

Thanks

kamlesh