FINANCIAL

ACCOUNTING
BY KRISHNA PRASAD CS
BCOM TAX A
ACCOUNTING STANDARD
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).
NATURE OF ACCOUNTING STANDARD
Accounting standards dominate the work of
accountants. These standards are being changed, added
and deleted with passage of time. Accounting standards
act as guidelines and handy rules for the conduct of
accounting work. Any accounting standard usually
consists three parts.
(i) A description of the problem to be handled
(ii) Discussion of ways of solving the problems
(iii) In the light of discussion the prescribed solution.
OBJECTIVE OF ACCOUNTING
STANDARDS

• It facilitates transparent and meaningful

reporting of financial information.
• It reduce accounting alternative
• It enchance comparability of financial statement
in time
• It encourage consistency in accounting practises.
BENEFITS OF ACCOUNTING STANDARDS
1] Attains Uniformity in Accounting
2] Improves Reliability of Financial Statements
3] Prevents Frauds and Accounting Manipulations

LIMITATION OF ACCOUNTING STANDARDS

1] Difficulty between Choosing Alternatives

2] Restricted Scope
ACCOUNTING STANDARD BOARD

On 21st April 1977, the Institute of Chartered Accountants of

India as the premier accounting body in our country, set up
“Accounting Standard Board” (ASB) to harmorize the diverse
accounting policies and practice prevalent in our country.
The Accounting Standards Board is an independent body
with the authority to establish accounting standards for use by
all Canadian entities outside the public sector. We serve the
public interest by establishing standards for financial reporting
by all Canadian private sector entities and by contributing to
the development of internationally accepted financial reporting
standards.
FUNTIONS OF ASB
 To conceive of and suggest areas in which Accounting Standards
need to be developed.
 To formulate Accounting Standards through a comprehensive
process.
 To review, at regular intervals, the Accounting Standards from the
point of view of changed conditions.
 To provide, from time to time, interpretations and guidance to
support implementation of Accounting Standards.
 To take adequate steps to enhance knowledge of the members and
other stakeholders for effective implementation of Accounting
Standards.
 To contribute to the development of a single set of high quality
globally accepted financial reporting standards for international use
by IFRS Foundation.
PROCEDURE OF ISSUING ACCOUNTING
STANDARD IN INDIA

1. First, the ASB will identify areas where the formulation of accounting standards
may be needed
2. Then the ASB will constitute study groups and panels to discuss and study the
topic at hand.
3. The ASB then carries out deliberations of the said draft of the standard. If
necessary changes and revisions are made.
4. Then this preliminary draft is circulated to all concerned authorities.
5. Then the ASB arranges meetings with these representatives to discuss their views
and concerns about the draft and its provisions
6. The exposure draft is then finalized and presented to the public for their review
and comments
7. The comments by the public on the exposure draft will be reviewed. Then a final
draft will be prepared for the review and consideration of the ICAI
8. The Council of the ICAI will then review and consider the final draft of the
standard. If necessary they may suggest a few modifications.
9. Finally, the Accounting Standard is issued
List of Accounting Standards
Policies related to accounting disclosure (AS 1)
This standard deals with the disclosure of significant accounting
policies which are followed in preparing and presenting financial
statements.
Valuation of Inventories (AS 2)
This standard deals with the determination of value at which
inventories are carried in the financial statements, including the
ascertainment of cost of inventories and any write-down thereof to net
realizable value.
Property, Plant and Equipment (AS 10)
The objective of this Standard is to prescribe the accounting treatment
for property, plant and equipment (PPE).
Revenue Recognition (AS 9)
This standard deals with the recognition of revenue in Profit and Loss
a/c of an enterprise. Revenue recognition is concerned with the
revenue arising in the course of the ordinary activities of the enterprise
such as the sale of goods, rendering of services, interest, royalties and
dividends
Lease (AS 19)
The objective of this standard is to prescribe the appropriate
accounting policies and disclosures in relation to finance leases and
operating leases.
IFRS AND IND-AS
International Financial Reporting Standards (IFRS)
set common rules so that financial statements can
be consistent, transparent and comparable around
the world. IFRS are issued by the International
Accounting Standards Board (IASB).
Indian Accounting Standard (abbreviated as
Ind-AS) is the Accounting standard adopted by
companies in India and issued under the
supervision of Accounting Standards Board (ASB)
which was constituted as a body in the year 1977.
LEVEL 1 ENTERPRISES
1. Entities whose securities are listed or are in the process of
listing on any stock exchange, whether in India or outside India.
2. Banks financial institutions or entities carrying on insurance
business.
3. All entities engaged in commercial, industrial or business
activities, whose turnover exceeds rupees two-fifty crore in the
immediately preceding accounting year.
4. All entities engaged in commercial, industrial or business
activities having borrowings in excess of rupees fifty crore at
any time during the immediately preceding accounting year.
5. Holding and subsidiary entities of any one of the above.
LEVEL 2 ENTERPRISE
1. All entities engaged in commercial, industrial or business activities,
whose turnover exceeds rupees fifty crore but does not exceed
rupees two-fifty crore in the immediately preceding accounting year.
2. All entities engaged in commercial, industrial or business activities
having borrowings in excess of rupees ten crore but not in excess of
rupees fifty crore at any time during the immediately preceding
accounting year.
3. Holding and subsidiary entities of any one of the above

LEVEL 3 ENTERPRISE
Non-company entities which are not covered under Level I and Level II but
fall in any one or more of the following categories are classified as Level III
entities
THANK YOU