|Accounting policies are the specific accounting principles, and the methods of applying those principles, adopted by a person.|
|Three fundamental accounting assumptions:
1. Going Concern: refers to the assumption that the person has neither the intention nor the necessity of liquidation or of curtailing materially the scale of the business, profession or vocation and intends to continue his business, profession or vocation for the foreseeable future.
2. Consistency: “Consistency” refers to the assumption that accounting policies are consistent from one period to another.
3. Accrual : “Accrual” refers to the assumption that revenues and costs are accrued, i.e. recognised as they are earned or incurred and not as money is received or paid and recorded in the previous year to which they relate
|If any of the accounting assumption is not followed then disclosure of the same is mandatory.|
|Key difference between AS 1 and ICDS 1
1. ICDS does not recognise the concept of prudence, hence marked to market losses are not considered.
2. Concept of materiality has been removed from ICDS for precise computation of income.
3. ICDS prohibits changes in accounting policies without reasonable cause whereas the AS provides for changes where there is a statutory requirement or if changes will lead to better presentation.