SSAP and FRS

SSAP and FRS

FRS 18 - ACCOUNTING POLICIES<BR><BR><BR>The Going Concern Concept<BR>A business is assumed to be healthy and likely to continue in business for the foreseeable future unless the opposite is known to be true. <BR><BR>Otherwise we would have to value stock at what we could sell it for rather than at cost. <BR>FRS 18 states that the financial statements must be prepared under the going concern basis unless the entity is being ( or is going to be ) liquidated or if it has ceased (or is about to cease ) trading.<BR><BR><BR>The Accruals or Matching Concept<BR>In computing profit, revenue earned must be matched against the expenditure incurred in earning it.<BR><BR>FRS 18 states that this is the second key concept when preparing accounts.<BR><BR><BR>The Prudence Concept<BR>Where alternative procedures or valuations are possible, the one selected should give the most cautious presentation of the businessâ??s financial position or results.<BR><BR>Revenues and profits should never be anticipated but provision should be made for anticipated expenses and loss in asset values.<BR><BR><BR>The Consistency Concept<BR>Similar items should be accorded similar accounting treatment.<BR><BR>Once a firm has chosen a particular method in accounting, it should adhere to that method in the future, so as to allow for them most meaningful comparisons on a yearâ??by-year basis. e.g. depreciation- if we choose to depreciate using the straight line method then it should not be changed to reducing balance method the next accounting year.<BR>Only when there are compelling reasons should a change be adopted.<BR><BR><BR>The Materiality Concept<BR>Only material items should appear in the financial statements. Items are material if their omission or misstatement would affect the impact of the financial statements on the reader. We are not interested in insignificant items.( Insignificant depends on size of company or what it is being taken in context with)<BR><BR>An error, which is too trivial to affect anyoneâ??s understanding of the accounts, is immaterial. <BR>In preparing accounts it is important to ask:<BR>Do material considerations apply?<BR>e.g. You will pay the exact amount of a purchase invoice no matter how large or small it is. You would not round it up or down.<BR><BR>What is material and what is not?<BR>Time and money should not be wasted on excessive detail.<BR>Major expenses such as heat, light and rent would show in the profit and loss account under their appropriate headings whereas in the case of minor expenses it is usual to group them under the heading of â??sundry expensesâ??. A detailed breakdown would not be useful.<BR><BR><BR><BR>FRS 15- TANGIBLE FIXED ASSETS <BR><BR>A fixed asset is an asset intended fro use on a continuing basis in the companyâ??s activities i.e. it is not intended for resale.<BR><BR>The initial cost of a fixed asset comprises not only the purchase price, but also any other expenses directly attributable to bringing the asset into its working condition for its intended use (e.g. legal fees, delivery costs, site preparation etc). This is known as capital expenditure.<BR><BR>All assets with a limited economic lifespan should be depreciated.<BR>(But beware various SSAPâ??s and FRSâ??s do allow some exceptions e.g. Land unless subject to depletion such as a quarry)<BR><BR>Depreciation is a measurement of the wearing out, use or other reduction in the useful economic life of a fixed asset, whether arising from use, passage of time or obsolescence through technology or market changes. <BR>Depreciation should be allocated so that a fair proportion of cost or valuation of the asset is charged to each accounting period expected to benefit from its use.<BR><BR><BR>This definition makes two important points:<BR><BR>a) Depreciation is a measure of the wearing out of a fixed asset through use, time or obsolescence.<BR>b) Depreciation should be spread fairly over a fixed assetâ??s life, and so allocated to the accounting periods expected to benefit from the assetâ??s use.<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>SSAP 5 â?? ACCOUNTING FOR VALUE ADDED TAX<BR><BR><BR><BR>a) Sales shown in the profit and loss account should exclude VAT on taxable outputs (sales). If gross sales must be shown then the VAT in that figure must also be shown as a deduction in arriving at the sales exclusive of VAT.<BR><BR>b) Irrecoverable VAT relating to fixed assets and other items separately disclosed should be included in their cost where material and practical.<BR><BR>c) The net amount due to (or from) HM Customs & Excise should be included in the total for the creditors (or debtors) and need not be separately disclosed.<BR><BR><BR><BR><BR>SSAP 9 â?? STOCKS & LONG TERM CONTRACTS<BR><BR><BR><BR>Stock should be valued at the lower of cost and net realisable value.<BR><BR>The cost of unsold or unconsumed stocks is carried forward until the period in which the stock is sold or consumed.<BR><BR><BR><BR>SSAP 21 â?? ACCOUNTING FOR LEASES AND HIRE PURCHASE<BR><BR><BR><BR>Defines two different types of lease: Finance leases and Operating leases<BR><BR>A finance lease transfers substantially all the risks and rewards of ownership to the lessee. Although strictly the leased asset remains the property of the lessor, in substance the lessee may be considered to have acquired the asset and to have financed the acquisition by obtaining a loan from the lessor.<BR><BR>SSAP 21 requires lessees to capitalise material finance leases because the transaction is considered to be the economic equivalent of borrowing to acquire an asset; accordingly, the lessee records the asset and the liability to pay lease rentals in its balance sheet. <BR><BR>An operating lease is any lease, which is not a finance lease. An operating lease has the character of a rental agreement with the lessor usually being responsible for repairs and maintenance of the asset. Often these are relatively short-term agreements with the same asset being leased, in succession, to different lessees. <BR><BR>An operating lease is more closely akin to the hire of an asset and so the lessee is not required to capitalise the lease. Operating lease rentals are charged to the profit and loss account and information about operating lease commitments is disclosed in the notes to the accounts<BR> <BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>

SSAP and FRS

just typed up notes hope they help

SSAP and FRS

u ust be joking, i cant that stuff (i'm mathatical minded person, essay's & report rnt my strong point)<BR>i doubt very much they gonna test us on that stuff