Which of the following provide framework and accounting policies so that the financial statements of different enterprise become comparable ?a)Business standardsb)Accounting standardsc)Market standardsd)None of the above.Correct answer is option 'B'. Can you explain this answer?

Question

Answer

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.

Answer

Accounting Standards:
Accounting standards provide a framework and set of accounting policies that help ensure the financial statements of different enterprises are comparable. Here's how accounting standards achieve this:

Consistency:
- Accounting standards ensure that companies follow consistent accounting practices when preparing their financial statements. This consistency allows for better comparability between different businesses.

Transparency:
- By providing guidelines on how to report financial information, accounting standards improve the transparency of financial statements. This transparency makes it easier for investors, creditors, and other stakeholders to make informed decisions.

Reliability:
- Following accounting standards helps ensure the reliability of financial information. This reliability is crucial for stakeholders to have confidence in the financial statements of a company.

Compliance:
- Accounting standards are mandatory for companies to comply with, which helps ensure that all businesses follow the same rules when preparing their financial statements. This compliance enhances comparability between different enterprises.
In conclusion, accounting standards play a crucial role in providing a framework and accounting policies that make the financial statements of different enterprises comparable. This comparability is essential for stakeholders to analyze and evaluate the financial performance of businesses effectively.

Answer

Framework and Accounting Policies for Comparable Financial Statements
The correct answer is B: Accounting standards.
Explanation:
Accounting standards provide a framework and set of accounting policies that ensure the financial statements of different enterprises are comparable. These standards are established by professional accounting bodies and regulatory authorities to promote consistency and transparency in financial reporting. Here are some key points to consider:
- Accounting standards: These are a set of rules and guidelines that dictate how financial transactions should be recorded, measured, and reported in the financial statements. They provide a common language and structure for financial reporting, making it easier to compare the financial performance and position of different companies.
- Framework: Accounting standards provide a conceptual framework that outlines the objectives, assumptions, principles, and constraints underlying financial reporting. This framework helps guide the development and application of accounting policies, ensuring consistency and comparability across different enterprises.
- Comparability: The main purpose of accounting standards is to ensure that financial statements are comparable. This means that users of financial statements can make meaningful comparisons between different companies, industries, or time periods. Comparable financial statements enable investors, creditors, and other stakeholders to make informed decisions based on reliable and consistent information.
- Other options: Business standards and market standards do not specifically address the framework and accounting policies for comparable financial statements. While they may have their own guidelines and regulations, they are not specifically focused on financial reporting and comparability.
In conclusion, accounting standards play a crucial role in providing a framework and accounting policies that ensure the financial statements of different enterprises become comparable. They promote consistency, transparency, and reliability in financial reporting, benefiting users of financial statements in making informed decisions.

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