Basic Concept of Accounting Standards: -
The basic concept of accounting standards is to provide a common
set of guidelines for the preparation and presentation of financial
statements. The purpose of accounting standards is to ensure that
financial statements are consistent, reliable and comparable
across entities, regardless of their size or type of business.
Accounting standards provide a framework for accounting
practices, policies, and procedures, and cover areas such as
recognition, measurement, and presentation of financial
transactions. This helps to ensure that financial information is
reported in a transparent and consistent manner, allowing
stakeholders to make informed decisions
Some of the key features of accounting standards include
> Consistency: Accounting standards provide consistency in the
preparation and presentation of financial statements, so that
financial information can be compared across entities
> Relevance: Accounting standards ensure that financial
information is relevant to the needs of stakeholders, and that it
provides information that is useful for decision-making
> Reliability: Accounting standards ensure that financial
information is reliable and trustworthy, and that it accurately
reflects the financial position and performance of an entity
> Objectivity: Accounting standards ensure that financial
information is reported in an objective and impartial manner, and
that it is free from bias or manipulation
Overall, the basic concept of accounting standards is to provide a
common language and set of guidelines for the preparation and
presentation of financial statements so that financial information
can be easily compared, analyzed, and understood.
Accounting standard applicability: -
In India, the Institute of Chartered Accountants of India (ICAI) sets
accounting standards that entities must follow when preparing
financial statements. The applicability of these standards depends
on the type and size of the entity.
Companies: Companies, including listed and unlisted companies,
must comply with the accounting standards set by the ICAI.
➤ Small and Medium Enterprises (SMEs): The Ministry of
Corporate Affairs has prescribed simplified accounting standards
for SMEs, which are less complex and easier to apply than the
standards for larger companies.
Non-profit organizations (NPOs): NPOs, such as charities and non-
government organizations, must comply with the accounting
standards specific to NPOs, which are set by the ICAI.
➤ Government entities: Government entities, such as departments
and public sector undertakings, must comply with the accounting
standards set by the Comptroller and Auditor General of India
(CAG).
It's important to note that the ICAI, CAG, and Ministry of Corporate
Affairs can make changes to the accounting standards as
necessary, so it's important for entities to stay informed and up-
to-date on any changes.
List of accounting standards with basic knowledge: -
1. Accounting Standard (AS) 1: Disclosure of Accounting Policies -
This standard provides guidance on the disclosures that should be
included in financial statements to provide users with a clear
understanding of the entity's accounting policies.
2. Accounting Standard (AS) 2: Valuation of Inventories - This
standard provides guidance on the recognition, measurement, and
presentation of inventories in financial statements.
3. Accounting Standard (AS) 3: Cash Flow Statements - This
standard provides guidance on the preparation and presentation
of cash flow statements, which provide information on an entity's
inflows and outflows of cash and cash equivalents.
4. Accounting Standard (AS) 4: Contingencies and Events
Occurring after the Balance Sheet Date - This standard provides
guidance on the recognition and disclosure of contingent liabilities
and events that occur after the balance sheet date.
5. Accounting Standard (AS) 5: Net Profit or Loss for the Period,
Prior Period Items and Changes in Accounting Policies - This
standard provides guidance on the recognition and disclosure of
prior period items, changes in accounting policies, and the
presentation of net profit or loss for the period in financial on the
recognition and disclosure of prior period items, changes in
accounting policies, and the presentation of net profit or loss for
the period in financial statements.
6. Accounting Standard (AS) 6: Depreciation Accounting - This
standard provides guidance on the recognition, measurement, and
presentation of depreciation in financial statements.
7. Accounting Standard (AS) 7: Construction Contracts - This
standard provides guidance on the accounting for construction
contracts, including the recognition of revenue and expenses, and
the presentation of construction contract assets and liabilities.
8. Accounting Standard (AS) 8: Accounting for Research and
Development - This standard provides guidance on the accounting
for research and development activities, including the recognition
and measurement of research and development costs.
9. Accounting Standard (AS) 9: Revenue Recognition - This
standard provides guidance on the recognition of revenue from
contracts with customers, including the timing and measurement
of revenue recognition.
10.Accounting Standard (AS) 10: Accounting for Fixed Assets -
This standard provides guidance on the recognition,
measurement, and presentation of fixed assets in financial
statements.
11.Accounting Standard (AS) 11: The Effects of Changes in Foreign
Exchange Rates - This standard provides guidance on the
accounting for transactions in foreign currencies and the effects of
changes in foreign exchange rates on financial statements.
12.Accounting Standard (AS) 12: Accounting for Government
Grants - This standard provides guidance on the accounting for
government grants, including the recognition and measurement of
government grants, and the presentation of government grant
assets and liabilities in financial statements.
13.Accounting Standard (AS) 13: Accounting for Investments -
This standard provides guidance on the accounting for
investments, including the recognition, measurement, and
presentation of investments in financial statements.
14.Accounting Standard (AS) 14: Accounting for Amalgamations -
This standard provides guidance on the accounting for business
combinations, including the recognition and measurement of
assets and liabilities, and the presentation provides guidance on
the accounting for business combinations, including the
recognition and measurement of assets and liabilities, and the
presentation of business combination transactions in financial
statements.
15.Accounting Standard (AS) 15: Employee Benefits - This
standard provides guidance on the accounting for employee
benefits, including pensions, gratuities, and other post-
employment benefits.
16.Accounting Standard (AS) 16: Borrowing Costs - This standard
provides guidance on the recognition and capitalization of
borrowing costs, including the presentation of borrowing costs in
financial statements.
17.Accounting Standard (AS) 17: Segment Reporting - This
standard provides guidance on the disclosure of segment
information in financial statements, including the presentation of
revenue, profit or loss, and assets by segment.
18.Accounting Standard (AS) 18: Related Party Disclosures - This
standard provides guidance on the disclosure of transactions with
related parties and the presentation of related party transactions
in financial statements.
19.Accounting Standard (AS) 19: Leases - This standard provides
guidance on the accounting for leases, including the recognition
and measurement of lease assets and liabilities, and the
presentation of lease transactions in financial statements.
20.Accounting Standard (AS) 20: Earnings Per Share - This
standard provides guidance on the calculation and presentation of
earnings per share, which is a measure of the profitability of an
entity.
21.Accounting Standard (AS) 21: Consolidated Financial
Statements - This standard provides guidance on the preparation
and presentation of consolidated financial statements, which are
financial statements that combine the financial information of a
parent entity and its subsidiaries.
22.Accounting Standard (AS) 22: Accounting for Taxes on Income
- This standard provides guidance on the recognition and
measurement of current and deferred taxes in financial
statements.
23.Accounting Standard (AS) 23: Accounting for Investments in
Associates - This standard provides guidance on the accounting
for investments in associates, including the recognition and
measurement of investments in associates and the presentation of
investments in associates in financial statements.
24.Accounting Standard (AS) 24: Discontinuing Operations This
standard provides guidance on the accounting for discontinuing
operations, including the recognition and measurement of
discontinuing operations, and the presentation of discontinuing
operations in financial statements.
25.Accounting Standard (AS) 25: Interim Financial Reporting -
This standard provides guidance on the preparation and
presentation of interim financial statements, which are financial
statements that provide information about an entity's financial
performance and position for a portion of a financial year.
26.Accounting Standard (AS) 26: Intangible Assets - This standard
provides guidance on the recognition, measurement, and
presentation of intangible assets in financial statements.
27.Accounting Standard (AS) 27: Financial Reporting of Interests
in Joint Ventures - This standard provides guidance on the
accounting for interests in joint ventures, including the
recognition, measurement, and presentation of interests in joint
ventures in financial statements.
28.Accounting Standard (AS) 28: Impairment of Assets - This
standard provides guidance on the recognition and measurement
of impairments in financial statements, including the impairment
of tangible and intangible assets.
29.Accounting Standard (AS) 29: Provisions, Contingent Liabilities
and Contingent Assets - This standard provides guidance on the
recognition, measurement, and presentation of provisions,
contingent liabilities, and contingent assets in financial
statements.
30.Accounting Standard (AS) 30: Financial Instruments:
Recognition and Measurement - This standard provides guidance
on the recognition, measurement, and presentation of financial
instruments in financial statements.
31.Accounting Standard (AS) 31: Interests in Joint Arrangements
- This standard provides guidance on the accounting for interests
in joint arrangements, including the recognition, measurement,
and presentation of interests in joint arrangements in financial
statements.
32.Accounting Standard (AS) 32: Financial Instruments:
Presentation - This standard provides guidance on the
presentation of financial instruments in financial statements,
including the presentation of financial assets and financial
liabilities.
