Applicability of accounting standards

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Querist : Anonymous

Querist : Anonymous (Querist)

14 September 2012 I would like to know whether the Accounting Standards are applicable if an entity (other than a company) follows cash basis of accounting

Amol S Joglekar

Amol S Joglekar (Expert)
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14 September 2012 Accounting standards are applicable irrespective of the type of entity. Please refer to ICAI web site for applicablity of Accounting Standards to various types of entities.... say SME, others etc.

SANYAM ARORA

SANYAM ARORA (Expert)
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14 September 2012 Agreed with the reply

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Querist : Anonymous

Querist : Anonymous (Querist)

17 September 2012 Dear Sir

I agree that Accounting Standards are applicable to all entities. The question is about the basis of accounting. e.g. AS-9 on "Revenue Recognition" talks about accrual of revenue. Like this many accounting standards talk about recognition principles which are mainly based on accrual method. Entities other than companies have a choice of following cash basis of accouting. In such a situation, would they be required to follow these accounting standards for recognition principles.

Amol S Joglekar

Amol S Joglekar (Expert)
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17 September 2012 Which accounting standard DISREGARDS or DERECOGNISES cash system of accounting for other than company kind of entities?

Querist : Anonymous

Querist : Anonymous (Querist)

18 September 2012 Dear Sir

e.g. If the goods are sold on credit, as per AS-9, sale is recognised the moment the property in the goods gets transferred to the buyer (assuming the amount is collectible in future) irrespective of when the amount is received. This is accrual basis of accounting. Please let me know how do we apply this principle in cash basis of accounting? Since as per cash basis of accounting, the sale is recognised only when amount is realised.

Amol S Joglekar

Amol S Joglekar (Expert)
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18 September 2012 The system of accounting is decided FIRST, later comes the transaction recording. Once CASH system is selected the 'credit sale' becomes out of focus. Since credit sale has occurred which is not the part of accounting system... (Accounting Standards will play its vital role at the stage of transaction recording.) Your views solicited; please.

Querist : Anonymous

Querist : Anonymous (Querist)

18 September 2012 Dear Sir

That's what exactly my query was. I feel that only those accounting standards that deal with measurement principles would be applicable to entities following cash basis of accounting. the standards dealing with recognition principles may not be applicable as all the standards are based on accrual method of accounting. That is also confirmed by AS-1 which says that if the fundamental accounting assumptions (going concern, consistency and accrual) are not followed then the same needs to be specifically mentioned. Kindly provide your inputs on the above.

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Amol S Joglekar

Amol S Joglekar (Expert)
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18 September 2012 My firm is writing books of accounts of many people following CASH system of accounting. But we never faced any problem as such. That is the reason I asked to give your views. What is the exact DIFFICULTY. Is there any ARGUMENT from the ELITE class? Please feel free to communicate... amolshankar@gmail.com