Question

Explain the nature of accounting standards

Answer 1

Accounting Standards (AS) are basic policy documents. Their main aim is to ensure transparency, reliability, consistency, and comparability of the financial statements. They do so by standardizing accounting policies and principles of a nation/economy. So the transactions of all companies will be recorded in a similar manner if they follow these accounting standards.

These Accounting Standards (AS) are issued by an accounting body or a regulatory board or sometimes by the government directly. In India, the Indian Accounting Standards are issued by the Institute of Chartered Accountants of India (ICAI).

Accounting Standards mainly deal with four major issues of accounting, namely

1. Recognition of financial events
2. Measurement of financial transactions
3. Presentation of financial statements in a fair manner
4. Disclosure requirement of companies to ensure stakeholders are not misinformed