Indian Accounting Standard Basics for commerce Graduates

Accounting Standards

1. AS 1: Disclosure of Accounting Policies AS 1 requires companies to disclose their significant accounting policies and principles AS 1 ensures that the financial statements comply with the accounting standards prescribed by the Institute of Chartered Accountants of India (ICAI) Disclosure of accounting policies enhances transparency and comparability in financial reporting

2. AS 2: Valuation of Inventories AS 2 provides guidelines for the valuation of inventories AS 2 ensures that inventories are valued at the lower of cost or net realizable value Correct valuation of inventories is important for accurate financial reporting

3. AS 6: Depreciation Accounting AS 6 provides guidelines for the depreciation accounting of fixed assets AS 6 ensures that the depreciation rates are appropriate Correct depreciation calculation is important for accurate financial reporting

4. AS 10: Accounting for Fixed Assets AS 10 provides guidelines for the accounting treatment of fixed assets AS 10 ensures that fixed assets are recognized at their cost Correct accounting of fixed assets is important for accurate financial reporting

5. Introduction to Accounting Standards A Comprehensive Overview of Accounting Standards

6. Agenda Overview of Accounting Standards The presentation will start with a brief introduction to accounting standards and their purpose in financial reporting and decision making. Applicability of Accounting Standards In this section, the applicability of accounting standards will be explored in terms of their usage by different types of entities and industries. AS 1 - Disclosure of Accounting Policies AS 1 deals with the disclosure of significant accounting policies followed by an entity in the preparation and presentation of financial statements. AS 2 - Valuation of Inventories AS 2 deals with the determination of the value of inventories and the methods to be used for their valuation.

7. Overview of Accounting Standards Definition of Accounting Standards Accounting standards are a set of guidelines and principles that help to standardize the accounting practices and financial reporting of organizations. These standards ensure consistency and accuracy in financial reporting, making it easier for investors, stakeholders and other interested parties to understand an organization's financial health. Need for Accounting Standards Accounting standards are necessary because they ensure that financial statements are reliable, transparent, and comparable across organizations and countries. This makes it easier for investors, stakeholders, and other interested parties to make informed decisions about an organization's financial health.

8. Definition of Accounting Standards Purpose of Accounting Standards Accounting standards ensure that financial statements are accurate, complete, and comparable across organizations and industries. History of Accounting Standards Accounting standards have evolved over time to keep pace with changes in the business environment and financial reporting requirements.

9. Need for Accounting Standards Consistency Accounting standards ensure consistency in financial reporting, making it easier to understand and compare financial statements across different organizations. Transparency Accounting standards promote transparency in financial reporting, making it easier for stakeholders to understand and analyze financial information. Reliability Accounting standards increase the reliability of financial statements, providing stakeholders with accurate and trustworthy information to make informed decisions.

10. Applicability of Accounting Standards Companies Accounting standards are applicable to all types of companies, including public and private companies, and cover various aspects of financial reporting. Partnerships and Sole Proprietorships Partnerships and sole proprietorships are also required to comply with accounting standards, but the extent of their compliance may vary depending on their size and nature. Limited Liability Partnerships Limited liability partnerships are required to comply with accounting standards, and their financial statements must be audited by a qualified auditor.

11. Types of Business Organizations to whom AS is applicable Companies Accounting standards are applicable to all types of companies, including public and private companies, and cover areas such as financial statements, revenue recognition, and business combinations. Partnerships Partnerships, including limited liability partnerships, are also subject to accounting standards. The standards cover areas such as partnership accounts and the distribution of profits and losses. Sole Proprietorships Sole proprietorships are also subject to accounting standards, although the standards may be less comprehensive than those applicable to larger organizations.

12. Applicability of AS in India As per the Companies Act, 2013, accounting standards are applicable to all companies in India. They are also applicable to banks, insurance companies, and non-profit organizations.

13. Detailed Explanation of AS 1, 2, 6, and 10 AS 1: Disclosure of Accounting Policies AS 1 requires companies to disclose their significant accounting policies and principles and ensure that the financial statements comply with the accounting standards prescribed by the Institute of Chartered Accountants of India (ICAI). AS 2: Valuation of Inventories AS 2 provides guidelines for the valuation of inventories, including the determination of the cost of inventories and the methods of inventory valuation. It ensures that inventories are valued at the lower of cost or net realizable value. AS 6: Depreciation Accounting AS 6 provides guidelines for the depreciation accounting of fixed assets. It ensures that the depreciation rates are appropriate, and the method of depreciation is consistent with the expected pattern of benefits from the asset. AS 10: Accounting for Fixed Assets AS 10 provides guidelines for the accounting treatment of fixed assets, including the recognition, measurement, and disclosure of fixed assets in the financial statements. It ensures that fixed assets are recognized at their cost and are appropriately depreciated over their useful life.

14. AS 1: Disclosure of Accounting Policies AS 1 requires organizations to disclose their significant accounting policies in their financial statements. This enhances transparency and comparability in financial reporting.

15. AS 2: Valuation of Inventories AS 2 provides guidance on the valuation of inventories, requiring organizations to value their inventory at the lower of cost or net realizable value. This helps to ensure that the inventory is valued correctly and prevents overstatement of profits.

16. AS 6: Depreciation Accounting Guidelines on Depreciation Accounting AS 6 provides guidelines on the depreciation accounting of fixed assets, ensuring that the assets are depreciated correctly and their carrying value is reflected accurately in the financial statements. Depreciation Calculation Organizations are required to calculate depreciation based on the useful life of the asset and the method of depreciation used, as per AS 6. This ensures that the carrying value of the assets are accurately reflected in the financial statements.

17. AS 10: Accounting for Fixed Assets Accounting for Fixed Assets AS 10 provides guidance on the accounting treatment of fixed assets, including the measurement, recognition, and disclosure of fixed assets in financial statements. Measurement of Fixed Assets AS 10 provides guidelines for the measurement of fixed assets, including the cost of acquisition, capitalization of borrowing costs, and the revaluation of fixed assets.

18. Conclusion Importance of Accounting Standards Accounting standards are crucial for ensuring consistency and transparency in financial reporting. They provide guidelines for accounting practices, increase the reliability and comparability of financial statements, and ensure that financial information is presented in an accurate and useful way. Guidelines for Accounting Practices Accounting standards provide guidelines for accounting practices, ensuring that financial information is presented in a standardized and consistent way. This allows for easy comparison of financial statements across different organizations and industries. Compliance with Accounting Standards It is important for organizations to follow the accounting standards applicable to them, as this ensures that their financial statements are accurate and reliable. Compliance with accounting standards also helps to build trust with stakeholders, including investors, creditors, and regulators.