Accounting Policies:-
Accounting policies are the specific accounting principles and methods of applying these principles adopted by the enterprise in the preparation and presentation of financial statements.
Policies are based on accounting concepts, principles and conventions.
Examples:-
- Valuation of inventory.
- Valuation of investments.
- Valuation of fixed assets.
- Depreciation methods.
Selection of Accounting Policies:- is an important decision affects the performance and financial position of the enterprise.
There are 3 characteristics which should be taken into consideration for selection and application of accounting policies namely Prudence, Substance over form, and Materiality.