accounting standards. Introduction to Accounting Standards

Topics: Financial statements, Balance sheet, International Financial Reporting Standards Pages: 22 (7273 words) Published: August 25, 2013
accounting standards
accounting standards

Introduction to Accounting Standards
Accounting is the art of recording transactions in the best manner possible. Accounting Standards are the policy documents issued by recognized expert accountancy bodies relating to various aspects of measurement, treatment

and disclosure of accounting transactions and events. Every country has its own standards. Accounting Standards in India are issued by the Institute of Chartered Accountants of India (ICAI). At present there are 30 Accounting Standards issued by ICAI. As of 2010, the Institute of Chartered Accountants of India has issued 32 Accounting Standards. These are numbered AS-1 to AS-7 and AS-9 to AS-32 (AS-8 is no longer in force since it was merged with AS-26). Compliance with Accounting Standards issued by ICAI has become a statutory requirement with the notification of Companies (Accounting Standards) Rules, 2006 by the Government of India. Before the constitution of the National Advisory Committee on Accounting Standards (NACAS), the institute was the sole accounting standard setter in India. However NACAS is not an independent body. It can only consider Accounting Standards recommended by ICAI and advise the Government of India to notify them under the Companies Act, 1956. Further the accounting standards so notified are applicable only to companies registered under the Companies Act, 1956. For all other entities the accounting standards issued the ICAI continue to apply.

Accounting Concepts
Accounting concepts are broad general assumptions with which underlie the periodic financial accounts of business enterprises. The reason why some of these ideas should be called concepts is that they are basic assumptions and have a direct bearing on the quality of financial accounting information. The accounting concepts are as follows: 1. Business Entity Concept

In accounting we make a distinction between business and the owner. All the records are kept from the viewpoint of the business rather than from that of the owner. An enterprise is an economic unit separate and apart from the owner or owners. As such, transactions of the business and those of the owners should be accounted for and reported separately. This implies that owner's personal and household expenses or obligations will not appear in the books of account. One reason for this distinction is to make it possible for the owners to have an account of the performance from those who manage the enterprise. The managers are entrusted with funds supplied by owners, banks and others; they are responsible for the proper use of the funds. The financial accounting reports are designed to show how well this responsibility has been discharged. 2. Money Measurement Concepts

In accounting, only those facts which can be expressed in terms of money are recorded. As money is accepted not only as a medium of exchange but also as a store of value, it has a very important advantage since a number of widely different assets and equities can be expressed in terms of a common denominator. 3. Going Concern Concept

Accounting assumes that the business will continue to operate for a long time in the future unless there is good evidence to the contrary. The enterprise is viewed as a going concern, that is, as continuing in operation, at least in the foreseeable future. The owners have no intention nor have they the necessity to wind up or liquidate its operations. The assumption that the business is not expected to be liquidated in the foreseeable future, in fact, establishes the basis for many of the valuations and allocations in accounting. For example, depreciation procedures rest upon this concept. It is this assumption which underlies the decision of investors to commit capital to enterprise. The concept holds that continuity of business activity is the reasonable expectation for the business unit for which the accounting function is being performed. Only on the...
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