Commerce Exam  >  Commerce Notes  >  Introduction - Accounting Standards

Introduction - Accounting Standards - Commerce PDF Download

Accounting Standards:

“It refers to the code of conduct imposed on accountants by customs, laws and professionals”

- Accounting standards are written statements of uniform accounting rules and guidelines in practice for preparing the uniform and consistent financial statements

Generally Accepted Accounting Principles (GAAP) :

Generally Accepted Accounting principles refer to the rules or guidelines adopted for recording and reporting of business transactions in order to bring uniformity in the preparation and presentation of financial statements. These principles are also referred to as concepts and conventions.

Nature of accounting standards:

1. It lay down the norms of accounting policies and practices by way of codes to direct that how the transactions are to be disclosed in the accounts.

2. It helps to make the financial statements comparable by making the accounting practices and policies similar.

3. They provide with the best accounting treatment from the available methods of solving the problems.

4. They provide information to the users on the basis of which the financial statement is prepared.

5. They are just like laws as they limit the area in which the accountant has to function.

Utility of accounting standards.

1. Improves the reliability and credibility of books of accounts.

2. Ensures comparability and consistency of financial statements.

3. Reduces the chances of frauds and manipulations.

4. Helpful to auditors.

List of some important accounting standards (out of total as32)

As1 disclosure of accounting policies

As2 valuation of inventories

As3 cash flow statement

As6 depreciation accounting

As26 intangible assets

IFRS (INTERANTIONAL FINANCIAL REPORTING STANDARDS)

- The term IFRS is issued by IASB (INTERNATIONAL FINANCIAL REPORTING STANDARDS)

- IFRS also covers a wide range of IAS(INTERNATIONAL ACCOUNTING STANDARDS) issued by IASC (INTERNATIONAL

FINANCIAL REPORTING COMMITEE)

- IFRS has also replaced GAAP.

- Till now 9 IFRS has been issued

Assumptions of IFRS

-Going concern assumption

- Accrual assumption

- Measuring unit assumption(assets are not shown at the historic price but they are the fair value)

Benefits of IFRS:

- Helpful to investors.

- Helpful for enterprise operating globally.

- Helpful to industry.

The document Introduction - Accounting Standards - Commerce is a part of Commerce category.
All you need of Commerce at this link: Commerce

Top Courses for Commerce

FAQs on Introduction - Accounting Standards - Commerce

1. What are accounting standards?
Ans. Accounting standards are a set of guidelines and rules that govern the measurement, recognition, presentation, and disclosure of financial information in financial statements. These standards ensure that financial statements are prepared in a consistent and transparent manner, allowing users to make informed decisions based on reliable and comparable financial information.
2. Why are accounting standards important in commerce?
Ans. Accounting standards are important in commerce as they provide a common language for financial reporting, enabling businesses to communicate their financial performance and position effectively. These standards enhance transparency, comparability, and consistency in financial reporting, which in turn promotes trust among investors, creditors, and other stakeholders. Additionally, adherence to accounting standards helps businesses comply with legal and regulatory requirements.
3. Who establishes accounting standards?
Ans. Accounting standards are established by various standard-setting bodies, depending on the jurisdiction. In the United States, the Financial Accounting Standards Board (FASB) is responsible for setting accounting standards for public and private companies. Internationally, the International Financial Reporting Standards (IFRS) Foundation sets the accounting standards used by many countries. Other countries may have their own national standard-setting bodies.
4. How do accounting standards affect financial statements?
Ans. Accounting standards have a significant impact on financial statements. They dictate how transactions and events are recognized, measured, and presented in financial statements. The standards provide guidelines on topics such as revenue recognition, expense recognition, measurement of assets and liabilities, and disclosure requirements. By following these standards, financial statements become more reliable, comparable, and useful for decision-making purposes.
5. What are the benefits of using accounting standards in commerce?
Ans. The use of accounting standards in commerce offers several benefits. Firstly, it enhances the transparency and credibility of financial information, improving investor confidence and attracting capital investment. Secondly, it facilitates comparability between different companies and industries, allowing stakeholders to benchmark performance and make informed decisions. Thirdly, it promotes consistency in financial reporting, making it easier for users to understand and analyze financial statements. Lastly, accounting standards help businesses comply with legal and regulatory requirements, reducing the risk of penalties or legal consequences.
Download as PDF
Explore Courses for Commerce exam

Top Courses for Commerce

Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
10M+ students study on EduRev
Related Searches

Sample Paper

,

Important questions

,

Previous Year Questions with Solutions

,

MCQs

,

ppt

,

study material

,

Objective type Questions

,

mock tests for examination

,

past year papers

,

Exam

,

Semester Notes

,

Summary

,

Free

,

Introduction - Accounting Standards - Commerce

,

Extra Questions

,

shortcuts and tricks

,

Viva Questions

,

pdf

,

practice quizzes

,

Introduction - Accounting Standards - Commerce

,

Introduction - Accounting Standards - Commerce

,

video lectures

;