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All questions of Introduction to Accounting Standards for CA Intermediate Exam
How many Accounting Standards have been issued by ICAI?- a)25.
- b)20.
- c)32.
- d)2.
Correct answer is option 'C'. Can you explain this answer?
How many Accounting Standards have been issued by ICAI?
a)
25.
b)
20.
c)
32.
d)
2.
|
Jayant Mishra answered |
32 Accounting Standards
Accounting Standards. 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 These are numbered AS-1 to AS-7 and AS-9 to AS-32 (AS-8 is no longer in force since it was merged with AS-26).
Accounting for Fixed Assets: - a)AS 6
- b)AS 10
- c)AS 3
- d)AS 2
Correct answer is option 'B'. Can you explain this answer?
Accounting for Fixed Assets:
a)
AS 6
b)
AS 10
c)
AS 3
d)
AS 2
|
Niharika Datta answered |
The correct answer is option 'B' - AS 10.
AS 10, also known as Accounting Standard for Fixed Assets, provides guidelines for accounting for fixed assets. Fixed assets are long-term tangible assets that are used in the production or supply of goods and services, for rental purposes, or for administrative purposes. Some examples of fixed assets include land, buildings, machinery, equipment, and vehicles.
AS 10 provides guidelines for the following aspects of fixed assets accounting:
1. Recognition of Fixed Assets: Fixed assets should be recognized when they are probable to generate future economic benefits, their cost can be measured reliably, and they meet the definition of fixed assets.
2. Initial Measurement of Fixed Assets: Fixed assets should be measured initially at cost, which includes all the costs necessary to acquire and bring the asset to its working condition for its intended use.
3. Subsequent Measurement of Fixed Assets: Fixed assets should be carried at cost less accumulated depreciation and impairment losses.
4. Depreciation: Depreciation should be provided on fixed assets to reflect their consumption of economic benefits over their useful lives.
5. Impairment: Fixed assets should be tested for impairment whenever there is an indication of impairment, and an impairment loss should be recognized if the carrying amount of the asset exceeds its recoverable amount.
6. Retirement or Disposal of Fixed Assets: Fixed assets should be derecognized from the books when they are retired or disposed of, and any resulting gain or loss should be recognized in the profit and loss account.
In summary, AS 10 provides guidelines for recognizing, measuring, depreciating, impairing, and disposing of fixed assets. By following these guidelines, companies can ensure that their financial statements accurately reflect the value of their fixed assets and the expenses associated with their use over time.
AS 10, also known as Accounting Standard for Fixed Assets, provides guidelines for accounting for fixed assets. Fixed assets are long-term tangible assets that are used in the production or supply of goods and services, for rental purposes, or for administrative purposes. Some examples of fixed assets include land, buildings, machinery, equipment, and vehicles.
AS 10 provides guidelines for the following aspects of fixed assets accounting:
1. Recognition of Fixed Assets: Fixed assets should be recognized when they are probable to generate future economic benefits, their cost can be measured reliably, and they meet the definition of fixed assets.
2. Initial Measurement of Fixed Assets: Fixed assets should be measured initially at cost, which includes all the costs necessary to acquire and bring the asset to its working condition for its intended use.
3. Subsequent Measurement of Fixed Assets: Fixed assets should be carried at cost less accumulated depreciation and impairment losses.
4. Depreciation: Depreciation should be provided on fixed assets to reflect their consumption of economic benefits over their useful lives.
5. Impairment: Fixed assets should be tested for impairment whenever there is an indication of impairment, and an impairment loss should be recognized if the carrying amount of the asset exceeds its recoverable amount.
6. Retirement or Disposal of Fixed Assets: Fixed assets should be derecognized from the books when they are retired or disposed of, and any resulting gain or loss should be recognized in the profit and loss account.
In summary, AS 10 provides guidelines for recognizing, measuring, depreciating, impairing, and disposing of fixed assets. By following these guidelines, companies can ensure that their financial statements accurately reflect the value of their fixed assets and the expenses associated with their use over time.
IASB stands for: - a)Indian Accounting Standards Board
- b)Indian accounting Standards Bulletin
- c)International Accounting Standards Bulletin
- d)International Accounting standards Boards
Correct answer is option 'D'. Can you explain this answer?
IASB stands for:
a)
Indian Accounting Standards Board
b)
Indian accounting Standards Bulletin
c)
International Accounting Standards Bulletin
d)
International Accounting standards Boards
|
Arjun Singhania answered |
International Accounting Standards Board
The IASC has a number of different bodies, the main one being the International Accounting Standards Board (IASB), which is the standard-setting body of the IASC. The acronym "GAAP" stands for Generally Accepted Accounting Principles. The IASC does not set GAAP, nor does it have any legal authority over GAAP.
AS 2 is on :- a)Disclosure of Accounting Policies
- b)Valuation of Inventories
- c)Revenue Recognition
- d)Depreciation Accounting
Correct answer is option 'B'. Can you explain this answer?
AS 2 is on :
a)
Disclosure of Accounting Policies
b)
Valuation of Inventories
c)
Revenue Recognition
d)
Depreciation Accounting
|
Poonam Reddy answered |
AS 2: Valuation of Inventories
Introduction: AS 2 is an accounting standard that provides guidelines for the valuation of inventories. It is applicable to all entities that prepare financial statements under the accrual basis of accounting.
Key Points:
- Objective: The main objective of AS 2 is to prescribe the method of determining the cost of inventories, its subsequent recognition as an expense, and its measurement at the lower of cost and net realizable value.
- Scope: AS 2 applies to all inventories, except for work in progress arising under construction contracts, financial instruments, and biological assets related to agricultural activity.
- Valuation Methods: AS 2 allows the use of various methods for the valuation of inventories, including specific identification, first-in, first-out (FIFO), and weighted average cost.
- Cost of Inventories: The cost of inventories consists of all costs incurred in bringing the inventories to their present location and condition. It includes the cost of purchase or production, conversion costs, and other costs necessary to bring the inventories to their present condition.
- Net Realizable Value: Inventories should be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion, disposal, and transportation.
- Recognition as an Expense: The cost of inventories should be recognized as an expense in the period in which the related revenue is recognized. Any write-down of inventories to net realizable value should be recognized as an expense in the period in which the write-down occurs.
- Disclosure Requirements: AS 2 requires certain disclosures in the financial statements, including the accounting policies adopted for the valuation of inventories, the carrying amount of inventories, and any write-downs recognized as an expense.
Conclusion: AS 2 provides guidance on the valuation of inventories, ensuring that they are carried at the lower of cost and net realizable value. It helps in presenting accurate and reliable financial statements by ensuring consistent accounting treatment for inventories across different entities.
Introduction: AS 2 is an accounting standard that provides guidelines for the valuation of inventories. It is applicable to all entities that prepare financial statements under the accrual basis of accounting.
Key Points:
- Objective: The main objective of AS 2 is to prescribe the method of determining the cost of inventories, its subsequent recognition as an expense, and its measurement at the lower of cost and net realizable value.
- Scope: AS 2 applies to all inventories, except for work in progress arising under construction contracts, financial instruments, and biological assets related to agricultural activity.
- Valuation Methods: AS 2 allows the use of various methods for the valuation of inventories, including specific identification, first-in, first-out (FIFO), and weighted average cost.
- Cost of Inventories: The cost of inventories consists of all costs incurred in bringing the inventories to their present location and condition. It includes the cost of purchase or production, conversion costs, and other costs necessary to bring the inventories to their present condition.
- Net Realizable Value: Inventories should be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion, disposal, and transportation.
- Recognition as an Expense: The cost of inventories should be recognized as an expense in the period in which the related revenue is recognized. Any write-down of inventories to net realizable value should be recognized as an expense in the period in which the write-down occurs.
- Disclosure Requirements: AS 2 requires certain disclosures in the financial statements, including the accounting policies adopted for the valuation of inventories, the carrying amount of inventories, and any write-downs recognized as an expense.
Conclusion: AS 2 provides guidance on the valuation of inventories, ensuring that they are carried at the lower of cost and net realizable value. It helps in presenting accurate and reliable financial statements by ensuring consistent accounting treatment for inventories across different entities.
The purpose of Accounting Standards is to : - a)Harmonise accounting policies
- b)Eliminate the non comparability of financial statements
- c)Improve reliability of financial statements
- d)All of the above
Correct answer is option 'D'. Can you explain this answer?
The purpose of Accounting Standards is to :
a)
Harmonise accounting policies
b)
Eliminate the non comparability of financial statements
c)
Improve reliability of financial statements
d)
All of the above
|
|
Arun Khanna answered |
Accounting Standards are written policy documents issued by expert accounting body or by the government or other regulatory body covering the aspects of recognition, measurement, treatment, presentation, and disclosure of accounting transactions in financial statements.
Which of the following provide framework and accounting policies so that the financial statements of different enterprise become comparable ?- a)Business standards
- b)Accounting standards
- c)Market standards
- d)None of the above.
Correct answer is option 'B'. Can you explain this answer?
Which of the following provide framework and accounting policies so that the financial statements of different enterprise become comparable ?
a)
Business standards
b)
Accounting standards
c)
Market standards
d)
None of the above.
|
|
Priya Patel answered |
Accounting Standards
- Accounting Standards are written policy document issued by expert accounting body or by government or regulatory body covering the aspects of recognition, treatment, measurement, presentation and disclosure of accounting transaction and events in the financial statements.
- Accounting Standards (ASs) provide framework and standard accounting policies so that financial statements of different enterprises become comparable.
- The Accounting Standards seek to ensure that the financial statements of an enterprise should give a true and fair view of its financial position and working results.
- The Accounting Standards not only prescribe appropriate accounting treatment of complex business transactions but also foster greater transparency and market discipline.
Accounting Standards ________ the statue:- a)Can over-ride
- b)Cannot over-ride
- c)May over-ride
- d)None
Correct answer is option 'B'. Can you explain this answer?
Accounting Standards ________ the statue:
a)
Can over-ride
b)
Cannot over-ride
c)
May over-ride
d)
None
|
Maheshwar Goyal answered |
Explanation:
Accounting Standards are guidelines and principles that are used to prepare financial statements. They are issued by regulatory bodies such as the Institute of Chartered Accountants of India (ICAI) and the Ministry of Corporate Affairs (MCA). These standards aim to provide uniformity and consistency in the preparation and presentation of financial statements. However, they do not have the power to over-ride the statute.
Statute refers to the law enacted by the legislative body of a country. It is a set of rules that govern the actions and conduct of individuals and organizations. In the context of accounting, statute refers to the laws that are applicable to the preparation and presentation of financial statements. These laws have the force of the law and cannot be over-ridden by Accounting Standards.
Therefore, the correct answer to the question is option B - Accounting Standards cannot over-ride the statute.
Importance of Compliance with Accounting Standards and Statutes:
It is important for companies to comply with both accounting standards and statutes. Non-compliance can result in legal and financial consequences such as fines, penalties, and legal action. Compliance with accounting standards and statutes also helps to ensure that financial statements are prepared accurately and fairly, and provide reliable information to stakeholders.
Conclusion:
Accounting Standards provide guidelines and principles for the preparation and presentation of financial statements. However, they cannot over-ride the statute. Compliance with both accounting standards and statutes is important to ensure accuracy and reliability of financial statements and to avoid legal and financial consequences.
Accounting Standards are guidelines and principles that are used to prepare financial statements. They are issued by regulatory bodies such as the Institute of Chartered Accountants of India (ICAI) and the Ministry of Corporate Affairs (MCA). These standards aim to provide uniformity and consistency in the preparation and presentation of financial statements. However, they do not have the power to over-ride the statute.
Statute refers to the law enacted by the legislative body of a country. It is a set of rules that govern the actions and conduct of individuals and organizations. In the context of accounting, statute refers to the laws that are applicable to the preparation and presentation of financial statements. These laws have the force of the law and cannot be over-ridden by Accounting Standards.
Therefore, the correct answer to the question is option B - Accounting Standards cannot over-ride the statute.
Importance of Compliance with Accounting Standards and Statutes:
It is important for companies to comply with both accounting standards and statutes. Non-compliance can result in legal and financial consequences such as fines, penalties, and legal action. Compliance with accounting standards and statutes also helps to ensure that financial statements are prepared accurately and fairly, and provide reliable information to stakeholders.
Conclusion:
Accounting Standards provide guidelines and principles for the preparation and presentation of financial statements. However, they cannot over-ride the statute. Compliance with both accounting standards and statutes is important to ensure accuracy and reliability of financial statements and to avoid legal and financial consequences.
Accounting Standards refers to specific accounting : - a)Principles
- b)Methods of applying those principles
- c)Both (a) and (b)
- d)None
Correct answer is option 'C'. Can you explain this answer?
Accounting Standards refers to specific accounting :
a)
Principles
b)
Methods of applying those principles
c)
Both (a) and (b)
d)
None
|
|
Deepika Desai answered |
Accounting Standards refer to specific accounting principles and methods of applying those principles. They provide guidelines and rules that companies and organizations must follow when preparing and presenting their financial statements.
Accounting Principles:
Accounting principles are the fundamental concepts and assumptions that guide the preparation of financial statements. These principles ensure consistency, comparability, and reliability in financial reporting. Some common accounting principles include:
1. Accrual Principle: This principle states that transactions should be recorded when they occur, regardless of when the cash is received or paid. It ensures that revenue and expenses are recognized in the appropriate accounting period.
2. Matching Principle: According to this principle, expenses should be recognized in the same accounting period as the revenues they help generate. It ensures that the income statement accurately reflects the earning capacity of the company.
3. Historical Cost Principle: This principle states that assets should be recorded at their original cost, rather than their current market value. It provides a reliable and objective basis for measuring and reporting financial information.
Methods of applying accounting principles:
While accounting principles provide the foundation for financial reporting, the methods of applying these principles vary based on industry practices, regulatory requirements, and specific circumstances. Some common methods include:
1. Revenue Recognition: Companies must determine when to recognize revenue from the sale of goods or services. This involves applying principles such as the point of sale, completion of performance obligations, and collectability of payment.
2. Inventory Valuation: Different methods such as First-In-First-Out (FIFO), Last-In-First-Out (LIFO), and Weighted Average Cost are used to determine the value of inventory. These methods impact the cost of goods sold and the value of ending inventory.
3. Depreciation: Companies must choose a depreciation method to allocate the cost of tangible assets over their useful lives. Common methods include straight-line, declining balance, and units of production.
Both (a) and (b):
Accounting Standards encompass both accounting principles and the methods of applying those principles. They provide a comprehensive framework for financial reporting, ensuring consistency and comparability between different entities. By following these standards, companies can provide transparent and reliable financial information to stakeholders such as investors, creditors, and regulators.
In conclusion, Accounting Standards refer to specific accounting principles and the methods of applying those principles. They play a crucial role in ensuring the accuracy, consistency, and comparability of financial statements.
Accounting Principles:
Accounting principles are the fundamental concepts and assumptions that guide the preparation of financial statements. These principles ensure consistency, comparability, and reliability in financial reporting. Some common accounting principles include:
1. Accrual Principle: This principle states that transactions should be recorded when they occur, regardless of when the cash is received or paid. It ensures that revenue and expenses are recognized in the appropriate accounting period.
2. Matching Principle: According to this principle, expenses should be recognized in the same accounting period as the revenues they help generate. It ensures that the income statement accurately reflects the earning capacity of the company.
3. Historical Cost Principle: This principle states that assets should be recorded at their original cost, rather than their current market value. It provides a reliable and objective basis for measuring and reporting financial information.
Methods of applying accounting principles:
While accounting principles provide the foundation for financial reporting, the methods of applying these principles vary based on industry practices, regulatory requirements, and specific circumstances. Some common methods include:
1. Revenue Recognition: Companies must determine when to recognize revenue from the sale of goods or services. This involves applying principles such as the point of sale, completion of performance obligations, and collectability of payment.
2. Inventory Valuation: Different methods such as First-In-First-Out (FIFO), Last-In-First-Out (LIFO), and Weighted Average Cost are used to determine the value of inventory. These methods impact the cost of goods sold and the value of ending inventory.
3. Depreciation: Companies must choose a depreciation method to allocate the cost of tangible assets over their useful lives. Common methods include straight-line, declining balance, and units of production.
Both (a) and (b):
Accounting Standards encompass both accounting principles and the methods of applying those principles. They provide a comprehensive framework for financial reporting, ensuring consistency and comparability between different entities. By following these standards, companies can provide transparent and reliable financial information to stakeholders such as investors, creditors, and regulators.
In conclusion, Accounting Standards refer to specific accounting principles and the methods of applying those principles. They play a crucial role in ensuring the accuracy, consistency, and comparability of financial statements.
What is the role of auditors in relation to deviations from Accounting Standards?- a)Auditors must ensure compliance regardless of deviations.
- b)Auditors must disclose deviations in their reports.
- c)Auditors must modify Accounting Standards to accommodate deviations.
- d)Auditors must report deviations to the International Accounting Standards Committee.
Correct answer is option 'B'. Can you explain this answer?
a)
Auditors must ensure compliance regardless of deviations.
b)
Auditors must disclose deviations in their reports.
c)
Auditors must modify Accounting Standards to accommodate deviations.
d)
Auditors must report deviations to the International Accounting Standards Committee.
|
Universal Academy answered |
In the event of any deviation from the Accounting Standards, it is the duty of auditors to make adequate disclosures in their reports. This ensures transparency and informs the users of financial statements about any deviations that might affect the interpretation of the statements.
AS – 8 on Accounting for Research and Development: - a)Is replaced by AS – 26
- b)Is applicable only to listed companies
- c)Is mandatory for Research Institutions
- d)Is still in use.
Correct answer is option 'A'. Can you explain this answer?
AS – 8 on Accounting for Research and Development:
a)
Is replaced by AS – 26
b)
Is applicable only to listed companies
c)
Is mandatory for Research Institutions
d)
Is still in use.
|
|
Jayant Mishra answered |
AS- 8 on Accounting for Research and Development was withdrawn w.e.f. 1st April 2003 and on and from that date AS- 26 on Intangible Assets become mandatory. Therefore AS- 8 was replaced by AS- 26.
How will the Accounting Standards be applied to items?- a)Uniformly to all items in financial statements.
- b)To items explicitly mentioned by the International Accounting Standards Committee.
- c)To material items only.
- d)To all items, regardless of their significance.
Correct answer is option 'C'. Can you explain this answer?
a)
Uniformly to all items in financial statements.
b)
To items explicitly mentioned by the International Accounting Standards Committee.
c)
To material items only.
d)
To all items, regardless of their significance.
|
|
Tanishq Kumar answered |
Understanding Accounting Standards Application
Accounting standards are essential guidelines that dictate how financial transactions and events should be recorded and reported in financial statements. The application of these standards plays a crucial role in ensuring transparency, consistency, and comparability of financial information.
Why Option 'C' is Correct
- Materiality Principle: Accounting standards are applied to all items, but the focus is particularly on material items. The materiality principle states that all information that could influence the decisions of users should be included in the financial statements.
- Holistic Approach: By applying standards to all items, regardless of their significance, companies can ensure that they are providing a complete and accurate picture of their financial position. This is essential for stakeholders, including investors, creditors, and regulators.
- Consistency: Uniformly applying accounting standards to all items helps maintain consistency across financial statements. This consistency is vital for users who rely on financial statements for decision-making.
Implications of Applying Standards to All Items
- Transparency: Inclusion of all items ensures that users of financial statements have access to comprehensive information, fostering trust and accountability.
- Risk Management: By addressing all items, organizations can better manage risks associated with financial reporting and ensure compliance with regulations.
- Enhanced Decision-Making: Stakeholders benefit from the thoroughness of financial reports, as they can make more informed decisions based on complete data.
In conclusion, the application of accounting standards to all items, particularly those that are material, ensures that financial statements are relevant, reliable, and useful for all stakeholders.
Accounting standards are essential guidelines that dictate how financial transactions and events should be recorded and reported in financial statements. The application of these standards plays a crucial role in ensuring transparency, consistency, and comparability of financial information.
Why Option 'C' is Correct
- Materiality Principle: Accounting standards are applied to all items, but the focus is particularly on material items. The materiality principle states that all information that could influence the decisions of users should be included in the financial statements.
- Holistic Approach: By applying standards to all items, regardless of their significance, companies can ensure that they are providing a complete and accurate picture of their financial position. This is essential for stakeholders, including investors, creditors, and regulators.
- Consistency: Uniformly applying accounting standards to all items helps maintain consistency across financial statements. This consistency is vital for users who rely on financial statements for decision-making.
Implications of Applying Standards to All Items
- Transparency: Inclusion of all items ensures that users of financial statements have access to comprehensive information, fostering trust and accountability.
- Risk Management: By addressing all items, organizations can better manage risks associated with financial reporting and ensure compliance with regulations.
- Enhanced Decision-Making: Stakeholders benefit from the thoroughness of financial reports, as they can make more informed decisions based on complete data.
In conclusion, the application of accounting standards to all items, particularly those that are material, ensures that financial statements are relevant, reliable, and useful for all stakeholders.
What is the intended effect of adopting Accounting Standards in the country?- a)To increase taxation on businesses.
- b)To create more complexity in financial reporting.
- c)To ensure uniformity and improved quality in financial statements.
- d)To replace the role of auditors in financial reporting.
Correct answer is option 'C'. Can you explain this answer?
a)
To increase taxation on businesses.
b)
To create more complexity in financial reporting.
c)
To ensure uniformity and improved quality in financial statements.
d)
To replace the role of auditors in financial reporting.
|
|
Universal Academy answered |
The adoption of Accounting Standards is intended to ensure uniformity in the presentation of financial statements and improve their quality. This leads to better transparency, comparability, and understanding of financial information among users.
It is essential to standardize the accounting principles and policies in order to ensure- a)Transparency.
- b)Consistency.
- c)Comparability.
- d)All of the above.
Correct answer is option 'D'. Can you explain this answer?
It is essential to standardize the accounting principles and policies in order to ensure
a)
Transparency.
b)
Consistency.
c)
Comparability.
d)
All of the above.
|
Freedom Institute answered |
Importance of standardizing accounting principles and policies
Standardizing accounting principles and policies is crucial for several reasons:
1. Transparency
- Standardization ensures that financial statements are prepared and presented in a consistent and transparent manner.
- Investors, creditors, and other stakeholders can easily understand and compare financial information across different companies.
- Transparency helps in building trust and confidence in the financial reporting process.
2. Consistency
- Standardized accounting principles and policies provide a consistent framework for recording, measuring, and reporting financial transactions.
- Consistency enables accurate and reliable financial statements, reducing the risk of errors and misinterpretation.
- Financial information prepared using consistent principles allows for effective analysis, decision-making, and evaluation of a company's performance over time.
3. Comparability
- Standardization facilitates the comparison of financial information between different companies, industries, and time periods.
- Investors and other users of financial statements can assess the financial performance and position of companies by comparing key metrics and ratios.
- Comparability supports benchmarking, industry analysis, and identification of trends and patterns in financial data.
4. All of the above
- All the three points mentioned above are interconnected and collectively contribute to the importance of standardizing accounting principles and policies.
- Transparency, consistency, and comparability work together to enhance the credibility, reliability, and usefulness of financial information.
In conclusion, standardizing accounting principles and policies is essential to ensure transparency, consistency, and comparability in financial reporting. These factors are crucial for stakeholders to make informed decisions, assess performance, and maintain confidence in the financial markets.
What is the initial character of the Standards with regards to compliance?- a)They are strictly enforced.
- b)They are exempted from compliance in the initial years.
- c)They are only recommendatory.
- d)They are enforced retroactively.
Correct answer is option 'C'. Can you explain this answer?
a)
They are strictly enforced.
b)
They are exempted from compliance in the initial years.
c)
They are only recommendatory.
d)
They are enforced retroactively.
|
|
Universal Academy answered |
In the initial years, the Accounting Standards are of a recommendatory nature. The Institute aims to educate members and users about the utility of these standards and the need for compliance through wide publicity and awareness-building efforts.
What is the process for issuing Accounting Standards?- a)ASB issues standards directly to the public.
- b)ASB drafts are reviewed by the International Accounting Standards Committee.
- c)ASB issues standards after approval by the Council of the Institute.
- d)ASB formulates standards based on suggestions from the public.
Correct answer is option 'C'. Can you explain this answer?
a)
ASB issues standards directly to the public.
b)
ASB drafts are reviewed by the International Accounting Standards Committee.
c)
ASB issues standards after approval by the Council of the Institute.
d)
ASB formulates standards based on suggestions from the public.
|
|
Universal Academy answered |
The process for issuing Accounting Standards involves ASB drafting exposure drafts, which are then reviewed and finalized. The final draft is submitted to the Council of the Institute for approval. Once approved, the Accounting Standard is issued under the authority of the Council.
What is the scope of Accounting Standards?- a)To override local regulations and laws.
- b)To replace the management's responsibility for financial statements.
- c)To apply only to immaterial items.
- d)To conform to applicable laws and business environment.
Correct answer is option 'D'. Can you explain this answer?
a)
To override local regulations and laws.
b)
To replace the management's responsibility for financial statements.
c)
To apply only to immaterial items.
d)
To conform to applicable laws and business environment.
|
|
Universal Academy answered |
Accounting Standards are designed to be in conformity with the provisions of applicable laws, customs, usages, and the business environment. They aim to improve the quality of financial reporting while considering the specific conditions of the country.
How will the Accounting Standards evolve in the future?- a)They will become more complex.
- b)They will be limited to essentials and basic matters.
- c)They will be replaced by International Accounting Standards.
- d)They will focus exclusively on local regulations.
Correct answer is option 'B'. Can you explain this answer?
a)
They will become more complex.
b)
They will be limited to essentials and basic matters.
c)
They will be replaced by International Accounting Standards.
d)
They will focus exclusively on local regulations.
|
|
Universal Academy answered |
The intention for the evolution of Accounting Standards is to keep them focused on essentials and basic matters. The aim is to maintain a level of simplicity that allows effective application across the nation, while still improving over time.
Accounting Standards- a)Harmonise accounting policies.
- b)Eliminate the non-comparability of financial statements.
- c)Improve the reliability of financial statements.
- d)All of the above.
Correct answer is option 'D'. Can you explain this answer?
Accounting Standards
a)
Harmonise accounting policies.
b)
Eliminate the non-comparability of financial statements.
c)
Improve the reliability of financial statements.
d)
All of the above.
|
|
Ankita Mukherjee answered |
The correct answer is option 'D', which states that all of the above options are correct. Let's discuss each of these options in detail:
a) Harmonise accounting policies:
Accounting standards aim to harmonize accounting policies by providing guidelines and rules for preparing financial statements. These standards ensure that companies follow similar accounting principles, methods, and practices when recording and reporting their financial transactions. Harmonizing accounting policies promotes consistency and comparability in financial reporting, making it easier for users of financial statements to analyze and compare the financial performance and position of different companies.
b) Eliminate the non-comparability of financial statements:
One of the primary objectives of accounting standards is to eliminate non-comparability of financial statements. Non-comparability arises when companies adopt different accounting policies or methods for similar transactions or events. This can lead to variations in financial reporting, making it difficult for users to make meaningful comparisons. Accounting standards provide guidance on selecting appropriate accounting policies and methods, ensuring that financial statements are comparable across different entities and periods.
c) Improve the reliability of financial statements:
Another objective of accounting standards is to improve the reliability of financial statements. Reliability refers to the accuracy, completeness, and neutrality of the information presented in financial statements. Accounting standards establish rules and principles that enhance the reliability of financial reporting by requiring companies to provide relevant and reliable information, use appropriate estimation techniques, disclose necessary details, and follow consistent accounting policies. This promotes transparency and helps users make informed decisions based on reliable financial information.
In summary, accounting standards play a crucial role in harmonizing accounting policies, eliminating non-comparability, and improving the reliability of financial statements. These objectives ensure that financial reporting is consistent, comparable, and provides reliable information to users. By following accounting standards, companies can enhance the usefulness and credibility of their financial statements, thereby benefiting various stakeholders such as investors, creditors, regulators, and the general public.
a) Harmonise accounting policies:
Accounting standards aim to harmonize accounting policies by providing guidelines and rules for preparing financial statements. These standards ensure that companies follow similar accounting principles, methods, and practices when recording and reporting their financial transactions. Harmonizing accounting policies promotes consistency and comparability in financial reporting, making it easier for users of financial statements to analyze and compare the financial performance and position of different companies.
b) Eliminate the non-comparability of financial statements:
One of the primary objectives of accounting standards is to eliminate non-comparability of financial statements. Non-comparability arises when companies adopt different accounting policies or methods for similar transactions or events. This can lead to variations in financial reporting, making it difficult for users to make meaningful comparisons. Accounting standards provide guidance on selecting appropriate accounting policies and methods, ensuring that financial statements are comparable across different entities and periods.
c) Improve the reliability of financial statements:
Another objective of accounting standards is to improve the reliability of financial statements. Reliability refers to the accuracy, completeness, and neutrality of the information presented in financial statements. Accounting standards establish rules and principles that enhance the reliability of financial reporting by requiring companies to provide relevant and reliable information, use appropriate estimation techniques, disclose necessary details, and follow consistent accounting policies. This promotes transparency and helps users make informed decisions based on reliable financial information.
In summary, accounting standards play a crucial role in harmonizing accounting policies, eliminating non-comparability, and improving the reliability of financial statements. These objectives ensure that financial reporting is consistent, comparable, and provides reliable information to users. By following accounting standards, companies can enhance the usefulness and credibility of their financial statements, thereby benefiting various stakeholders such as investors, creditors, regulators, and the general public.
Accounting Standards in India are issued by- a)Central Govt.
- b)State Govt.
- c)Institute of Chartered Accountants of India.
- d)Reserve Bank of India.
Correct answer is option 'C'. Can you explain this answer?
Accounting Standards in India are issued by
a)
Central Govt.
b)
State Govt.
c)
Institute of Chartered Accountants of India.
d)
Reserve Bank of India.
|
|
Rithika Nair answered |
The correct answer is option 'C': Institute of Chartered Accountants of India (ICAI).
Explanation:
Accounting standards are a set of principles, guidelines, and procedures that provide a framework for the preparation and presentation of financial statements. These standards ensure consistency, transparency, and comparability in financial reporting. In India, accounting standards are issued by the Institute of Chartered Accountants of India (ICAI), which is a statutory body established under the Chartered Accountants Act, 1949.
The ICAI is responsible for setting accounting standards in India through its Accounting Standards Board (ASB). The ASB comprises a group of experts and professionals who develop and issue accounting standards in line with international best practices and the requirements of Indian law.
The process of issuing accounting standards in India involves several stages:
1. Identification of the need for a new or revised accounting standard: The ASB identifies the areas where new or revised accounting standards are required. This can be based on changes in the business environment, emerging accounting issues, or updates to international accounting standards.
2. Drafting of the accounting standard: Once the need for a new or revised accounting standard is identified, the ASB drafts the standard. This involves extensive research, consultation with stakeholders, and consideration of international accounting standards.
3. Exposure draft: The draft accounting standard is then published as an exposure draft, which is made available for public comments and feedback. This allows stakeholders, including companies, auditors, and regulators, to provide their inputs and suggestions.
4. Finalization of the accounting standard: After considering the feedback received during the exposure draft stage, the ASB finalizes the accounting standard. This includes making any necessary revisions or modifications based on the inputs received.
5. Issuance of the accounting standard: Once finalized, the accounting standard is issued by the ICAI. It becomes mandatory for companies to comply with the accounting standard for the preparation and presentation of their financial statements.
It is important to note that while the ICAI issues accounting standards, it is the responsibility of companies, auditors, and regulators to ensure compliance with these standards. Non-compliance can result in penalties and legal consequences.
Overall, the Institute of Chartered Accountants of India (ICAI) is the authority responsible for issuing accounting standards in India through its Accounting Standards Board (ASB). These standards play a crucial role in ensuring the consistency and transparency of financial reporting in the country.
Explanation:
Accounting standards are a set of principles, guidelines, and procedures that provide a framework for the preparation and presentation of financial statements. These standards ensure consistency, transparency, and comparability in financial reporting. In India, accounting standards are issued by the Institute of Chartered Accountants of India (ICAI), which is a statutory body established under the Chartered Accountants Act, 1949.
The ICAI is responsible for setting accounting standards in India through its Accounting Standards Board (ASB). The ASB comprises a group of experts and professionals who develop and issue accounting standards in line with international best practices and the requirements of Indian law.
The process of issuing accounting standards in India involves several stages:
1. Identification of the need for a new or revised accounting standard: The ASB identifies the areas where new or revised accounting standards are required. This can be based on changes in the business environment, emerging accounting issues, or updates to international accounting standards.
2. Drafting of the accounting standard: Once the need for a new or revised accounting standard is identified, the ASB drafts the standard. This involves extensive research, consultation with stakeholders, and consideration of international accounting standards.
3. Exposure draft: The draft accounting standard is then published as an exposure draft, which is made available for public comments and feedback. This allows stakeholders, including companies, auditors, and regulators, to provide their inputs and suggestions.
4. Finalization of the accounting standard: After considering the feedback received during the exposure draft stage, the ASB finalizes the accounting standard. This includes making any necessary revisions or modifications based on the inputs received.
5. Issuance of the accounting standard: Once finalized, the accounting standard is issued by the ICAI. It becomes mandatory for companies to comply with the accounting standard for the preparation and presentation of their financial statements.
It is important to note that while the ICAI issues accounting standards, it is the responsibility of companies, auditors, and regulators to ensure compliance with these standards. Non-compliance can result in penalties and legal consequences.
Overall, the Institute of Chartered Accountants of India (ICAI) is the authority responsible for issuing accounting standards in India through its Accounting Standards Board (ASB). These standards play a crucial role in ensuring the consistency and transparency of financial reporting in the country.
What is the responsibility of auditors in relation to financial statements?- a)To prepare financial statements for the enterprise.
- b)To determine the extent of disclosure in financial statements.
- c)To form opinions and report on financial statements.
- d)To enforce compliance with Accounting Standards.
Correct answer is option 'C'. Can you explain this answer?
a)
To prepare financial statements for the enterprise.
b)
To determine the extent of disclosure in financial statements.
c)
To form opinions and report on financial statements.
d)
To enforce compliance with Accounting Standards.
|
|
Universal Academy answered |
The responsibility of auditors is to form opinions and report on financial statements. While the management is responsible for preparing the financial statements, auditors assess their accuracy and adherence to accounting principles.
Match the following
(A) AS 26 (i) Impairment of Assets
(B) AS 10 (ii) Discounting operations
(C) AS 28 (iii) Intangible assets
(D) AS 24 (iv) Accounting for Fixed Assets
The Correct alternative is:- a)(A) – (iii), (B) – (iv), (C) – (ii), (D) – (i)
- b)(A) – (ii), (B) – (iv), (C) – (i), (D) – (ii)
- c)(A) – (ii), (B) – (iv), (C) – (iii), (D) – (i)
- d)(A) – (iii), (B) – (iv), (C) – (i), (D) – (ii)
Correct answer is option 'D'. Can you explain this answer?
Match the following
(A) AS 26 (i) Impairment of Assets
(B) AS 10 (ii) Discounting operations
(C) AS 28 (iii) Intangible assets
(D) AS 24 (iv) Accounting for Fixed Assets
The Correct alternative is:
(A) AS 26 (i) Impairment of Assets
(B) AS 10 (ii) Discounting operations
(C) AS 28 (iii) Intangible assets
(D) AS 24 (iv) Accounting for Fixed Assets
The Correct alternative is:
a)
(A) – (iii), (B) – (iv), (C) – (ii), (D) – (i)
b)
(A) – (ii), (B) – (iv), (C) – (i), (D) – (ii)
c)
(A) – (ii), (B) – (iv), (C) – (iii), (D) – (i)
d)
(A) – (iii), (B) – (iv), (C) – (i), (D) – (ii)
|
Pragati Shah answered |
(iv), (B) (ii), (C) (iii), (D) (i)
IASB stands for: [2007 –August]- a)Indian accounting standards board
- b)Indian accounting standards bulleting
- c)International accounting standards bulletin
- d)International accounting standards board
Correct answer is option 'D'. Can you explain this answer?
IASB stands for: [2007 –August]
a)
Indian accounting standards board
b)
Indian accounting standards bulleting
c)
International accounting standards bulletin
d)
International accounting standards board
|
Varun Kapoor answered |
IASB - International Accounting Standards Board
The International Accounting Standards Board (IASB) is an independent organization that sets accounting standards for companies worldwide. It was established in 2001 and is based in London, UK. The IASB's main objective is to develop a single set of high-quality, global accounting standards that can be used by public companies when preparing their financial statements.
Role of IASB
- The IASB is responsible for developing International Financial Reporting Standards (IFRS), which are a set of accounting rules that companies use to prepare and present their financial statements.
- These standards are designed to provide a common language for businesses to communicate their financial performance and position to investors, creditors, and other stakeholders.
- By promoting consistency and transparency in financial reporting, the IASB aims to improve the quality and comparability of financial information, making it easier for investors to make informed decisions.
Significance of IASB
- The adoption of IFRS helps companies comply with regulatory requirements in different countries and facilitates cross-border investment and business transactions.
- By following IFRS, companies can enhance their credibility and reputation in the global marketplace, attracting more investors and reducing the cost of capital.
- The IASB's standards also contribute to economic growth and stability by promoting trust and confidence in financial markets.
In conclusion, the International Accounting Standards Board plays a crucial role in harmonizing accounting practices internationally, benefiting both companies and investors alike.
The International Accounting Standards Board (IASB) is an independent organization that sets accounting standards for companies worldwide. It was established in 2001 and is based in London, UK. The IASB's main objective is to develop a single set of high-quality, global accounting standards that can be used by public companies when preparing their financial statements.
Role of IASB
- The IASB is responsible for developing International Financial Reporting Standards (IFRS), which are a set of accounting rules that companies use to prepare and present their financial statements.
- These standards are designed to provide a common language for businesses to communicate their financial performance and position to investors, creditors, and other stakeholders.
- By promoting consistency and transparency in financial reporting, the IASB aims to improve the quality and comparability of financial information, making it easier for investors to make informed decisions.
Significance of IASB
- The adoption of IFRS helps companies comply with regulatory requirements in different countries and facilitates cross-border investment and business transactions.
- By following IFRS, companies can enhance their credibility and reputation in the global marketplace, attracting more investors and reducing the cost of capital.
- The IASB's standards also contribute to economic growth and stability by promoting trust and confidence in financial markets.
In conclusion, the International Accounting Standards Board plays a crucial role in harmonizing accounting practices internationally, benefiting both companies and investors alike.
Which of the following provide teamwork and accounting policies so that the financial statements of different enterprises become comparable? [2010 –December]- a)Business standards
- b)Accounting standards
- c)Market standards
- d)None of the above
Correct answer is option 'B'. Can you explain this answer?
Which of the following provide teamwork and accounting policies so that the financial statements of different enterprises become comparable? [2010 –December]
a)
Business standards
b)
Accounting standards
c)
Market standards
d)
None of the above
|
Siya Choudhary answered |
Understanding Accounting Standards
Accounting standards play a crucial role in ensuring the consistency and comparability of financial statements across different enterprises. Here’s a detailed explanation:
Definition of Accounting Standards
- Accounting standards are formal guidelines and principles that dictate how financial transactions and events should be recorded, summarized, and reported in financial statements.
Purpose of Accounting Standards
- The main objective is to provide a framework that:
- Ensures transparency in financial reporting.
- Enhances the reliability and relevance of financial information.
Enhancing Comparability
- By adhering to standardized accounting principles, different enterprises can present their financial data in a uniform manner. This comparability is essential for:
- Investors and stakeholders to make informed decisions.
- Regulatory bodies to monitor compliance and assess financial health.
Examples of Accounting Standards
- Prominent accounting frameworks include:
- International Financial Reporting Standards (IFRS)
- Generally Accepted Accounting Principles (GAAP)
These standards set out specific rules concerning revenue recognition, asset valuation, and expense reporting.
Conclusion
In summary, option 'B', accounting standards, provides the necessary framework for teamwork and policies that ensure financial statements across different enterprises are comparable, thus aiding stakeholders in their assessments and decisions.
Accounting standards play a crucial role in ensuring the consistency and comparability of financial statements across different enterprises. Here’s a detailed explanation:
Definition of Accounting Standards
- Accounting standards are formal guidelines and principles that dictate how financial transactions and events should be recorded, summarized, and reported in financial statements.
Purpose of Accounting Standards
- The main objective is to provide a framework that:
- Ensures transparency in financial reporting.
- Enhances the reliability and relevance of financial information.
Enhancing Comparability
- By adhering to standardized accounting principles, different enterprises can present their financial data in a uniform manner. This comparability is essential for:
- Investors and stakeholders to make informed decisions.
- Regulatory bodies to monitor compliance and assess financial health.
Examples of Accounting Standards
- Prominent accounting frameworks include:
- International Financial Reporting Standards (IFRS)
- Generally Accepted Accounting Principles (GAAP)
These standards set out specific rules concerning revenue recognition, asset valuation, and expense reporting.
Conclusion
In summary, option 'B', accounting standards, provides the necessary framework for teamwork and policies that ensure financial statements across different enterprises are comparable, thus aiding stakeholders in their assessments and decisions.
All of the following are limitations of Accounting Standards except- a)The choice between different alternative accounting treatments is difficult
- b)There may be trend towards rigidity
- c)Both A and B
- d)Accounting Standards cannot override the statute
Correct answer is option 'D'. Can you explain this answer?
All of the following are limitations of Accounting Standards except
a)
The choice between different alternative accounting treatments is difficult
b)
There may be trend towards rigidity
c)
Both A and B
d)
Accounting Standards cannot override the statute
|
|
Freedom Institute answered |
Accounting Standards cannot override the statute — is not a limitation. Instead, it is a fundamental principle, ensuring that accounting practices always comply with statutory laws and regulations. Therefore, the correct answer is option d.
Consistency with reference to application of accounting principles refer to the [2010 –December]- a)All the companies in the same industries should use identical procedures and methods
- b)Income and assets have not been oveRs.tated
- c)Accounting methods and procedures used have to be consistency applied from to year.
- d)Any accounting method or procedure can be utilized
Correct answer is option 'C'. Can you explain this answer?
Consistency with reference to application of accounting principles refer to the [2010 –December]
a)
All the companies in the same industries should use identical procedures and methods
b)
Income and assets have not been oveRs.tated
c)
Accounting methods and procedures used have to be consistency applied from to year.
d)
Any accounting method or procedure can be utilized
|
|
Saanvi Joshi answered |
Understanding Consistency in Accounting Principles
Consistency in accounting refers to the principle that a company should apply the same accounting methods and procedures from one financial period to the next. This is crucial for several reasons:
Importance of Consistency
- Comparability: By maintaining the same accounting practices, stakeholders can easily compare financial statements over different periods. This comparability aids investors, analysts, and management in making informed decisions.
- Reliability: Consistent application of accounting principles enhances the reliability of financial statements. Users of these statements can trust that any changes in figures are due to actual operational changes and not fluctuations in accounting methods.
Clarifying Option C
- Methodological Stability: Option C states that "Accounting methods and procedures used have to be consistently applied from year to year." This emphasizes that a company should not frequently change its accounting policies. If changes are necessary, they should be disclosed and justified.
- Financial Integrity: Consistency helps in maintaining the integrity of financial reporting. It prevents manipulation of financial results through arbitrary changes in accounting practices.
Why Other Options Are Incorrect
- Option A: While similar industries may adopt similar methods, it is not a requirement that all companies use identical procedures. Different entities may have valid reasons for their accounting choices.
- Option B: This option discusses the accuracy of income and assets but does not address the principle of consistency.
- Option D: This suggests that any method can be used, which contradicts the idea of consistency. Accounting methods must be applied consistently unless a justified change is made.
In conclusion, option C correctly captures the essence of the consistency principle in accounting, ensuring that financial statements are comparable and reliable over time.
Consistency in accounting refers to the principle that a company should apply the same accounting methods and procedures from one financial period to the next. This is crucial for several reasons:
Importance of Consistency
- Comparability: By maintaining the same accounting practices, stakeholders can easily compare financial statements over different periods. This comparability aids investors, analysts, and management in making informed decisions.
- Reliability: Consistent application of accounting principles enhances the reliability of financial statements. Users of these statements can trust that any changes in figures are due to actual operational changes and not fluctuations in accounting methods.
Clarifying Option C
- Methodological Stability: Option C states that "Accounting methods and procedures used have to be consistently applied from year to year." This emphasizes that a company should not frequently change its accounting policies. If changes are necessary, they should be disclosed and justified.
- Financial Integrity: Consistency helps in maintaining the integrity of financial reporting. It prevents manipulation of financial results through arbitrary changes in accounting practices.
Why Other Options Are Incorrect
- Option A: While similar industries may adopt similar methods, it is not a requirement that all companies use identical procedures. Different entities may have valid reasons for their accounting choices.
- Option B: This option discusses the accuracy of income and assets but does not address the principle of consistency.
- Option D: This suggests that any method can be used, which contradicts the idea of consistency. Accounting methods must be applied consistently unless a justified change is made.
In conclusion, option C correctly captures the essence of the consistency principle in accounting, ensuring that financial statements are comparable and reliable over time.
What is the primary function of the Accounting Standards Board (ASB)?- a)To audit financial statements.
- b)To formulate accounting standards.
- c)To enforce compliance with local regulations.
- d)To determine corporate tax rates.
Correct answer is option 'B'. Can you explain this answer?
a)
To audit financial statements.
b)
To formulate accounting standards.
c)
To enforce compliance with local regulations.
d)
To determine corporate tax rates.
|
|
Universal Academy answered |
The main function of the Accounting Standards Board (ASB) is to formulate accounting standards. These standards are intended to harmonize diverse accounting policies and practices in use in India. ASB's role is to develop these standards in consideration of applicable laws, customs, usages, and the business environment.
Accounting for fixed assets: [2007 –May]- a)AS 6
- b)AS 10
- c)AS 3
- d)AS 2
Correct answer is option 'B'. Can you explain this answer?
Accounting for fixed assets: [2007 –May]
a)
AS 6
b)
AS 10
c)
AS 3
d)
AS 2
|
|
Alok Bhatia answered |
Understanding Accounting Standards for Fixed Assets
In the context of accounting for fixed assets, the correct reference is to Accounting Standard 10 (AS 10), which specifically deals with the accounting treatment for tangible fixed assets.
Key Points about AS 10
- Definition of Fixed Assets: AS 10 defines fixed assets as tangible assets that are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes.
- Recognition: Fixed assets should be recognized when it is probable that future economic benefits associated with the asset will flow to the entity and the cost of the asset can be measured reliably.
- Measurement: Initially, fixed assets are measured at cost, which includes all expenditures directly attributable to bringing the asset to its intended use.
- Subsequent Measurement: After initial recognition, entities can choose between the cost model and the revaluation model for subsequent measurement of fixed assets.
- Depreciation: AS 10 outlines the need for systematic allocation of the depreciable amount of an asset over its useful life, ensuring that expenses reflect the use of the asset during each accounting period.
- Impairment: The standard also requires entities to assess whether there are any indications that a fixed asset may be impaired, necessitating an evaluation of its recoverable amount.
Conclusion
In summary, AS 10 is the key standard governing the accounting for fixed assets, detailing the principles of recognition, measurement, depreciation, and impairment, ensuring that fixed assets are accurately reflected in financial statements.
In the context of accounting for fixed assets, the correct reference is to Accounting Standard 10 (AS 10), which specifically deals with the accounting treatment for tangible fixed assets.
Key Points about AS 10
- Definition of Fixed Assets: AS 10 defines fixed assets as tangible assets that are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes.
- Recognition: Fixed assets should be recognized when it is probable that future economic benefits associated with the asset will flow to the entity and the cost of the asset can be measured reliably.
- Measurement: Initially, fixed assets are measured at cost, which includes all expenditures directly attributable to bringing the asset to its intended use.
- Subsequent Measurement: After initial recognition, entities can choose between the cost model and the revaluation model for subsequent measurement of fixed assets.
- Depreciation: AS 10 outlines the need for systematic allocation of the depreciable amount of an asset over its useful life, ensuring that expenses reflect the use of the asset during each accounting period.
- Impairment: The standard also requires entities to assess whether there are any indications that a fixed asset may be impaired, necessitating an evaluation of its recoverable amount.
Conclusion
In summary, AS 10 is the key standard governing the accounting for fixed assets, detailing the principles of recognition, measurement, depreciation, and impairment, ensuring that fixed assets are accurately reflected in financial statements.
As – 8 on accounting for research and development: [2007 –November]- a)Is replaced by AS -26
- b)Is applicable only to listed companies
- c)Is mandatory for research institutions
- d)Is still in use
Correct answer is option 'A'. Can you explain this answer?
As – 8 on accounting for research and development: [2007 –November]
a)
Is replaced by AS -26
b)
Is applicable only to listed companies
c)
Is mandatory for research institutions
d)
Is still in use
|
|
Jatin Bhatia answered |
Introduction
Accounting Standards (AS) play a crucial role in ensuring consistency and transparency in financial reporting. AS-8 specifically dealt with the accounting for research and development activities.
Replacement by AS-26
- AS-8 was replaced by AS-26, which focuses on intangible assets, including research and development expenses.
- This transition aimed to provide clearer guidelines on the recognition, measurement, and disclosure of intangible assets, improving the quality of financial reporting.
Applicability
- AS-8 was not limited to listed companies; it applied to all entities in India that followed the Indian GAAP (Generally Accepted Accounting Principles).
- AS-26 extends its applicability beyond just listed companies, ensuring a broader impact on various sectors.
Mandatory for Research Institutions
- The applicability of AS-8 to research institutions is not correct. AS-26 ensures that all entities, including research institutions, are aligned with the updated standards.
- Both AS-8 and AS-26 aimed at standardizing the treatment of R&D expenditures, but AS-26 offers a more comprehensive framework.
Current Status
- AS-8 is no longer in use; AS-26 has become the standard for accounting for research and development activities.
- Organizations must adhere to AS-26 to ensure compliance with current accounting standards.
Conclusion
In summary, the correct answer is option 'A' because AS-8 has been replaced by AS-26, which provides a more robust framework for accounting for research and development. This change reflects the evolution in accounting practices and the need for clarity in financial reporting.
Accounting Standards (AS) play a crucial role in ensuring consistency and transparency in financial reporting. AS-8 specifically dealt with the accounting for research and development activities.
Replacement by AS-26
- AS-8 was replaced by AS-26, which focuses on intangible assets, including research and development expenses.
- This transition aimed to provide clearer guidelines on the recognition, measurement, and disclosure of intangible assets, improving the quality of financial reporting.
Applicability
- AS-8 was not limited to listed companies; it applied to all entities in India that followed the Indian GAAP (Generally Accepted Accounting Principles).
- AS-26 extends its applicability beyond just listed companies, ensuring a broader impact on various sectors.
Mandatory for Research Institutions
- The applicability of AS-8 to research institutions is not correct. AS-26 ensures that all entities, including research institutions, are aligned with the updated standards.
- Both AS-8 and AS-26 aimed at standardizing the treatment of R&D expenditures, but AS-26 offers a more comprehensive framework.
Current Status
- AS-8 is no longer in use; AS-26 has become the standard for accounting for research and development activities.
- Organizations must adhere to AS-26 to ensure compliance with current accounting standards.
Conclusion
In summary, the correct answer is option 'A' because AS-8 has been replaced by AS-26, which provides a more robust framework for accounting for research and development. This change reflects the evolution in accounting practices and the need for clarity in financial reporting.
What is the purpose of issuing guidance notes on Accounting Standards?- a)To enforce compliance with Accounting Standards.
- b)To clarify phrases commonly used in financial statements.
- c)To provide exemptions from following Accounting Standards.
- d)To replace existing International Accounting Standards.
Correct answer is option 'B'. Can you explain this answer?
a)
To enforce compliance with Accounting Standards.
b)
To clarify phrases commonly used in financial statements.
c)
To provide exemptions from following Accounting Standards.
d)
To replace existing International Accounting Standards.
|
|
Universal Academy answered |
Guidance notes are issued by the Accounting Standards Board (ASB) to clarify phrases commonly used in financial statements. These notes help to provide better understanding and interpretation of the Accounting Standards, ensuring accurate implementation by entities.
Consistency with reference to application of accounting principles refer to the - a)All the companies in the same industries should use identical procedures and methods
- b)Income and assets have not been overstated
- c)Accounting methods and procedures used have to be consistently applied from year to year
- d)Any accounting method or procedure can be utilized.
Correct answer is option 'C'. Can you explain this answer?
Consistency with reference to application of accounting principles refer to the
a)
All the companies in the same industries should use identical procedures and methods
b)
Income and assets have not been overstated
c)
Accounting methods and procedures used have to be consistently applied from year to year
d)
Any accounting method or procedure can be utilized.
|
|
Rithika Nair answered |
Consistency in Accounting Principles
Consistency in accounting principles refers to the application of the same accounting methods and procedures from year to year. It means that once a company chooses a particular accounting method or procedure, it should continue to follow it consistently in the future. This enhances comparability of financial statements between different years, which is important for investors, analysts, and other stakeholders.
Importance of Consistency
Consistency is important for various reasons, some of which are:
1. Comparability: Consistent application of accounting principles ensures that financial statements can be compared between different years. It helps in identifying trends and patterns in the financial performance of a company.
2. Accuracy: Consistent application of accounting principles ensures that financial statements are accurate. It helps in reducing errors and misstatements in the financial statements.
3. Transparency: Consistent application of accounting principles enhances the transparency of financial statements. It helps in providing a clear and accurate picture of the financial performance of a company.
4. Credibility: Consistent application of accounting principles enhances the credibility of financial statements. It helps in building trust and confidence among investors, analysts, and other stakeholders.
Examples of Consistency
Consistency can be demonstrated in various ways, some of which are:
1. Depreciation: A company can choose to use the straight-line method of depreciation for its fixed assets. Once it chooses this method, it should continue to use it consistently in the future. Changing the method of depreciation can affect the comparability of financial statements between different years.
2. Inventory Valuation: A company can choose to use the first-in, first-out (FIFO) method for valuing its inventory. Once it chooses this method, it should continue to use it consistently in the future. Changing the method of inventory valuation can affect the comparability of financial statements between different years.
Conclusion
Consistency is an important principle in accounting. It ensures that financial statements are comparable, accurate, transparent, and credible. Companies should choose accounting methods and procedures carefully and apply them consistently from year to year.
Consistency in accounting principles refers to the application of the same accounting methods and procedures from year to year. It means that once a company chooses a particular accounting method or procedure, it should continue to follow it consistently in the future. This enhances comparability of financial statements between different years, which is important for investors, analysts, and other stakeholders.
Importance of Consistency
Consistency is important for various reasons, some of which are:
1. Comparability: Consistent application of accounting principles ensures that financial statements can be compared between different years. It helps in identifying trends and patterns in the financial performance of a company.
2. Accuracy: Consistent application of accounting principles ensures that financial statements are accurate. It helps in reducing errors and misstatements in the financial statements.
3. Transparency: Consistent application of accounting principles enhances the transparency of financial statements. It helps in providing a clear and accurate picture of the financial performance of a company.
4. Credibility: Consistent application of accounting principles enhances the credibility of financial statements. It helps in building trust and confidence among investors, analysts, and other stakeholders.
Examples of Consistency
Consistency can be demonstrated in various ways, some of which are:
1. Depreciation: A company can choose to use the straight-line method of depreciation for its fixed assets. Once it chooses this method, it should continue to use it consistently in the future. Changing the method of depreciation can affect the comparability of financial statements between different years.
2. Inventory Valuation: A company can choose to use the first-in, first-out (FIFO) method for valuing its inventory. Once it chooses this method, it should continue to use it consistently in the future. Changing the method of inventory valuation can affect the comparability of financial statements between different years.
Conclusion
Consistency is an important principle in accounting. It ensures that financial statements are comparable, accurate, transparent, and credible. Companies should choose accounting methods and procedures carefully and apply them consistently from year to year.
Accounting standards ______the status: [2007 –August]- a)Can over-ride
- b)Cannot over-ride
- c)May over-ride
- d)None
Correct answer is option 'B'. Can you explain this answer?
Accounting standards ______the status: [2007 –August]
a)
Can over-ride
b)
Cannot over-ride
c)
May over-ride
d)
None
|
Kanika Rao answered |
Understanding Accounting Standards
Accounting standards are essential guidelines that dictate how financial transactions and statements should be reported. They are designed to ensure consistency, transparency, and comparability in financial reporting across different entities.
Why Accounting Standards Cannot Over-ride Status
- Legal Framework: Accounting standards are often developed within a legal framework. They do not have the authority to override laws and regulations set by governing bodies. In cases of conflict, legal requirements take precedence.
- Regulatory Compliance: Businesses must comply with various regulatory requirements that may dictate specific accounting treatments. Standards cannot contravene these regulations; hence, they cannot override them.
- Framework Integrity: The integrity of the financial reporting framework relies on adherence to both accounting standards and legal statutes. If standards could override legal requirements, it would undermine the reliability and trustworthiness of financial statements.
- Consistency in Reporting: Allowing standards to override legal requirements could lead to inconsistencies in financial reporting. A consistent approach is crucial for stakeholders, including investors and regulators, who rely on standardized information for decision-making.
Conclusion
In summary, accounting standards cannot override the status of existing legal and regulatory frameworks. This adherence ensures that financial reporting remains reliable, consistent, and compliant with the law. Therefore, option 'B' is the correct answer, reflecting the foundational principle that legal statutes hold precedence over accounting standards.
Accounting standards are essential guidelines that dictate how financial transactions and statements should be reported. They are designed to ensure consistency, transparency, and comparability in financial reporting across different entities.
Why Accounting Standards Cannot Over-ride Status
- Legal Framework: Accounting standards are often developed within a legal framework. They do not have the authority to override laws and regulations set by governing bodies. In cases of conflict, legal requirements take precedence.
- Regulatory Compliance: Businesses must comply with various regulatory requirements that may dictate specific accounting treatments. Standards cannot contravene these regulations; hence, they cannot override them.
- Framework Integrity: The integrity of the financial reporting framework relies on adherence to both accounting standards and legal statutes. If standards could override legal requirements, it would undermine the reliability and trustworthiness of financial statements.
- Consistency in Reporting: Allowing standards to override legal requirements could lead to inconsistencies in financial reporting. A consistent approach is crucial for stakeholders, including investors and regulators, who rely on standardized information for decision-making.
Conclusion
In summary, accounting standards cannot override the status of existing legal and regulatory frameworks. This adherence ensures that financial reporting remains reliable, consistent, and compliant with the law. Therefore, option 'B' is the correct answer, reflecting the foundational principle that legal statutes hold precedence over accounting standards.
The Accounting standards are mandatory for: [2006 –November]- a)Companies
- b)PartneRs.hip concerns
- c)Charitable organizations
- d)Sole proprietoRs.hip
Correct answer is option 'A'. Can you explain this answer?
The Accounting standards are mandatory for: [2006 –November]
a)
Companies
b)
PartneRs.hip concerns
c)
Charitable organizations
d)
Sole proprietoRs.hip
|
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Pranav Choudhary answered |
Understanding Mandatory Accounting Standards
Accounting standards are essential for maintaining uniformity and transparency in financial reporting. These standards are crucial for various types of organizations, but they are mandatory primarily for companies. Here’s why:
1. Legal Framework
- Companies operate under specific legal frameworks, such as the Companies Act in various jurisdictions.
- These laws require companies to follow standardized accounting practices to provide accurate financial information to stakeholders.
2. Stakeholder Trust
- Stakeholders, including investors, creditors, and regulatory bodies, rely on consistent financial statements to make informed decisions.
- Mandatory accounting standards ensure that all companies present their financial data in a comparable and reliable manner.
3. Public Accountability
- Companies often have a larger public profile compared to sole proprietorships or partnerships.
- Given their size and potential impact on the economy, companies are held to higher accountability standards, necessitating adherence to established accounting norms.
4. Regulation and Oversight
- Regulatory bodies, such as the Securities and Exchange Commission (SEC) in the U.S., enforce compliance with accounting standards.
- This regulatory oversight is crucial for safeguarding public interest and ensuring that companies operate transparently.
5. Comparability Across Companies
- Standardized accounting principles allow for easier comparison between different companies.
- This comparability is vital for investors and analysts who evaluate company performance and make investment decisions.
In summary, while partnership concerns, charitable organizations, and sole proprietorships may adopt accounting standards voluntarily, companies are mandated to adhere to these standards to ensure legal compliance, stakeholder trust, public accountability, and comparability in financial reporting.
Accounting standards are essential for maintaining uniformity and transparency in financial reporting. These standards are crucial for various types of organizations, but they are mandatory primarily for companies. Here’s why:
1. Legal Framework
- Companies operate under specific legal frameworks, such as the Companies Act in various jurisdictions.
- These laws require companies to follow standardized accounting practices to provide accurate financial information to stakeholders.
2. Stakeholder Trust
- Stakeholders, including investors, creditors, and regulatory bodies, rely on consistent financial statements to make informed decisions.
- Mandatory accounting standards ensure that all companies present their financial data in a comparable and reliable manner.
3. Public Accountability
- Companies often have a larger public profile compared to sole proprietorships or partnerships.
- Given their size and potential impact on the economy, companies are held to higher accountability standards, necessitating adherence to established accounting norms.
4. Regulation and Oversight
- Regulatory bodies, such as the Securities and Exchange Commission (SEC) in the U.S., enforce compliance with accounting standards.
- This regulatory oversight is crucial for safeguarding public interest and ensuring that companies operate transparently.
5. Comparability Across Companies
- Standardized accounting principles allow for easier comparison between different companies.
- This comparability is vital for investors and analysts who evaluate company performance and make investment decisions.
In summary, while partnership concerns, charitable organizations, and sole proprietorships may adopt accounting standards voluntarily, companies are mandated to adhere to these standards to ensure legal compliance, stakeholder trust, public accountability, and comparability in financial reporting.
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Advanced Accounting for CA Intermediate
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