The FRS also requires that all profits and losses are shown. This is mainly because the profit and loss account has to show the true net profit and only then the profit share will be fair. Following this FRS makes it possible for the users of this data to fully understand it and it include all the things that are the profit and losses.

Once all the losses are recorded it is harder to mislead people. FRS 18 requires accounting polices to be consistent with accounting standards. This FRS gives the accountant the choice to which accounting policy they use that they consider the most appropriate.The accountant should use the policy until they think it is relevant and can change but only when it is right to do so. FRS 18 says that the accountants’ policy should be reviewed regularly so they remain the most appropriate in the circumstance.

It requires the accountant to disclose any changes in the policies or techniques.The new product research and development have been written off in the current year because they were a big loss in the year they were active and as far as I am concerned there was no demand for the idea and I think it would be best to drop the idea now because we wouldn’t want to risk it giving us a loss in the future.This was some sort of revolutionary new boot that failed at the first hurdle and what are the chances it makes a profit in the future. Also as stated in the prudence concept you should account for all of your losses and only state a profit when it has actually made a profit and I thought it would be a good idea to write it off this year and it will  5,000 gained next year that can be invested wisely in other ideas.

Also Mr Crabtree is working on a new idea which might be a next step for the company, he is demanding the  2,500 salary a year which is half the cost of the new product design. I would rather give the salary to Mr Crabtree.

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