ADVANCED ACCOUNTING
Ashkan majid
M. Com 1st year
ACCOUNTING STANDARDS
WHAT IS ACCOUNTING STANDARDS ?
Accounting standards are the statements of code of practice of the
regulatory accounting bodies that are to be observed in the
preparation and presentation of financial statements .
In layman terms accounting standards are the written documents
issued by the expert institutes or regulatory bodies covering various
aspects of measurements, treatment, presentation and disclosure of
accounting transaction .
DEFINITION BY LITTLETON
A standard is an agreed upon criteria of what is proper
practice in a given situation; a basis for comparison and
judgment; a point of departure when variation is justifiable
by the circumstances and reported as such. Standards are
not designed to confine practice within rigid limits but
rather to serve as guide posts to truth .
DEFINITION BY BROMWICH
accounting standards are uniform rules for financial
reporting. They standard sellers seek to prescribe a
preferred accounting treatment from the available set of
methods for treating one or more accounting problems.
They deal with financial measurements and disclosures
used in financial statements .
BENEFITS OF ACCOUNTING STANDARDS
1. Credibility of Financial Statements:
Standards when used in accounting make the financial
statements fair to all the groups of users. They imply that
among the various alternatives, the most suitable one
has been adopted in a given situation .
2. Benefits to Accountants and Auditors:
Standards provide guidelines for accounts and auditors
in the performance of their duties. They can resort to
these standards as a shield against any prosecution for
alleged lapse of duties such as discovered frauds .
3. Measuring Managerial Accountability:
Standards facilitate in determining specific corporate
accountability and regulation of the company. They
measure managerial skill and improve the profitability of
a company .
4. Reforming Accounting Theory and Practice:
Standards help in the development of accounting
theories and in the improvement of existing practices by
rectifying their defects where there is any. They make us
aware of alternative possibilities for defining and
measuring financial performance .
THE PRIMARY OBJECTIVES OF ACCOUNTING STANDARDS
To provide a standard for the diverse accounting policies and principles.
To put an end to the non-comparability of financial statements.
To increase the reliability of the financial statements.
To provide standards which are transparent for users.
To provide a suitable starting point for accounting.
