Accounting Standard-6 is meant for Depreciation accounting.
Depreciation is the process of allocating the cost of an asset over its useful life. The objective of depreciation accounting is to provide a systematic and rational means of allocating the cost of an asset to the periods in which it is expected to provide economic benefits.
Depreciation is calculated by multiplying the cost of the asset by the depreciation rate. The depreciation rate is determined by the expected useful life of the asset and the expected residual value of the asset.
The depreciation expense is recorded in the income statement and the accumulated depreciation is recorded in the balance sheet.
The depreciation expense is a non-cash expense, which means that it does not affect cash flow. However, the depreciation expense does affect taxable income, which means that it can affect the amount of tax that a company pays.
Accounting Standard-6 provides guidance on the accounting for depreciation. The standard requires that depreciation be calculated using the straight-line method, unless another method is more appropriate. The standard also requires that depreciation be reviewed at least annually and that any changes in the depreciation rate be accounted for prospectively.
The following are the options for the question:
- Accounting for fixed assets: Accounting for fixed assets is the process of recording and reporting the cost of fixed assets, such as land, buildings, and equipment. Fixed assets are assets that are used in the production of goods or services and that have a useful life of more than one year.
- Accounting treatment for goodwill: Goodwill is an intangible asset that arises when a company acquires another company for more than the fair value of its net assets. Goodwill is recorded as an asset on the balance sheet and is amortized over its useful life.
- Disclosure of accounting policies: Accounting policies are the specific principles, bases, conventions, rules and practices adopted by an entity in preparing and presenting financial statements. Accounting policies are disclosed in the notes to the financial statements.
The correct answer is Depreciation accounting.