Topic 1: CONCEPT & OBJECTIVES OF ACCOUNTING STANDARDS

INTRODUCTION

Accounting is a “language of business” that communicates the financial results of an enterprise t various stakeholders by means of financial statements. In order t endure transparency, consistency, comparability, adequacy and reliability of financial reporting, it is essential to standardize the accounting principles and policies. Accounting Standards (AS’s) provide frameworks and standard accounting policies so that the financial statements of different enterprise become comparable.

CONCEPT OF ACCOUNTING STANDARDS

Accounting Standards are written policy documents issued by government or other regulatory bodies like MCA, NACAS, covering the aspects of recognition, measurement, presentation and disclosure of accounting transactions in Financial Statements. The ostensible purpose of the standard setting bodies is to promote the dissemination f timely and useful financial information to investors and certain other stakeholders having an interest in the company’s economic performance.
Accounting Standards deals with the following:
i) Recognition of events and transaction in the financial statements.
ii) Measurements of these transactions and events.
iii) Presentation of transactions and vents in the financial statements in a manner that is meaningful and understandable to the reader and
iv) Disclosure relating to these transactions and events to enable the public at large and the stakeholder and the potential investors in particular, to get an insight into what these financial statement at trying to reflect and there by facilitating them to take prudent and informed business decisions.

OBJECTIVES OF ACCOUNTING STANDARDS

The whole idea of accounting is centered around harmonization of accounting policies and practices followed by different business entities so that the diverse accounting practices adopted for various aspects of accounting can be standardized.
Accounting Standards standardize diverse accounting policies with a view to:
i) Eliminate the non-comparability of financial statements and thereby improving the reliability of financial statements and
ii) Provide a set of standard accounting policies, valuation norms and disclosure requirements.
Accounting standards reduce the accounting alternative in the preparation of financial statements within the bounds of rationality, thereby ensuring comparability of financial statements of different enterprises.





Internal assessment:

MULTIPLE CHOICE QUESTIONS:                                                                             

1. While formulating the Accounting Standards, ASB will give due consideration to   (   c   )

a) IDBI b) IFSC    c) IASC     d) ADB

2. ICAI was establish ASB in India on   (  a  )

a) 21st Aug 1977

b) 22nd Sep 1983        

c) 21st Aug 1947

d) 26th Jan 1950

3. AS – 9 relates to   (   c   )

a) Employee benefits

b) borrowing cost 

c) revenue recognition

d) segment reporting

4. AS – 1 is related to   (   a    )

a) Disclosure of Accounting policies         

b) Valuation of Inventories

c) Cash flow statement 

d) Depreciation

5. ____ will review the AS from time to time  (   c  )

a) IFRS              

b) ICWAI               

c) ASB                  

d) none of them

6.     CBDT stands for   (   a   )

a) Central Board of Direct taxes                       

b) Central Brand Of Dominant Trade 

c) Central Bank Of Direct Trade                  

d) Censes Board For Domestic Taxes

7. Accounting for lease should be as per which AS   (   a   )

a) AS – 19   b) AS – 3     c) AS – 9 d)none of them

8. Accounting for investment must be as per _____   (   b    )

a) AS – 1  b) AS - 13  c) AS – 5   d) AS - 9

9. ASB organized  the first workshop to seek guidance of various bodies in September____   (   b    )

a) 1980   b) 1983   c) 1982 d) 1961   

10. AS on the “valuation of inventories” is  (  b  )

a) AS - 11 b) AS – 2   c) AS – 6   d) AS - 9

FILL IN THE BLANKS 

1. IAS stands for Indian Accounting Standards .

2.   Accounting standards  are formulated with a view to harmonies different accounting policies & practice different accounting policies & practices in the country.

3. Accounting for Amalgamation comes under AS- 14.

4. Accounting for fixed assets comes under AS-10.

5. AS-3 deals with cash flow statements.

6. ASB stands for Accounting Standards .

7. IFRS stands for International Financial Reporting Standards .

8. ICAI stands for Institute of Chartered accountant of India .

9. ICWAI stands for Institute of Cost and Work Accountant of India .

10. Accounting standards will be issued under the authority of the council.

WRITE A SHORT NOTE ON:                               

1. AS

2. ASB

3. ICAI

4. IFRS

5. ICWAI