Definition:

Accounting policies are the internal policies set by the entity to process, measure, recognize, record, as well as disclose the specific items or transactions in its financial statements.

Accounting policies might be different from one company to another; however, those policies are tailor to meet the specific International Accounting Standard or other standard bodies like local standards or regulations related to the purpose of financial reporting.

To ensure this, the companies setting up their own procedures and manuals to ensure the consistency of practices and to make sure that their accounting records are compliant with those accounting standards or local regulations.

To make sure financial statements of the company are preparing in accordance with specific accounting standards or regulations, accounting policies have to tailor specifically link with the company’s operation and accounting standards.

Types and example of accounting policies:

Policies are related to revenue recognition and measuring. This normally includes the criteria in which the company could recognize its revenue and amount to be recognized.

For example, the revenue is recognized only when the goods are receipt by the customer. In this case, the evidence to support revenue recognition in the financial statements would be a delivery note that signed receipted by the customers.

Accounting policies related to expenses including the general expenses and specific expenses like depreciation. For general expenses, for example, training is recognized only when the training incurred o not at the time cash advance for training.

The policies for expenses normally link to liabilities both recognition and measurement. Account policies for depreciation would be the nature of expenses that should or should not capitalize, the depreciation rate as well as the process of disposal assets.

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Another simple example of accounting policy is about inventories. Those policies will include what method the company uses to measure its inventories. It could be a weighted average or FIFO. The way how to entity control and manage its inventories.

For example, by using a perpetual inventories system or periodic inventories system. If the perpetual is use, inventories have to could continuously and randomly.

All of the policies in the company are very information therefore, management at all level have to understand and need to train their staff to understand as well.

Or example, by using a perpetual inventories system or periodic inventories system. If the perpetual is use, inventories have to could continuously and randomly. All of the policies in the company are very information therefore, management at all level have to understand and need to train their staff to understand as well.

In most of the case, the company has the induction program at the first time new employee come to work for the company and such program help the employee to be aware and understand about what are the important policies and Accounting Policies in the company, and what they need to do to avoid misconduct.

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