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Accounting Standards

The laws/framework behind the Accounting that explains the Procedure of Accounting in different scenarios, that brings the Uniformity in Accounting i.e Accounting Standards have been discussed. The objectives, benefits & limitations of Accounting standards have also been discussed.

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Accounting Standards

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  1. Accounting Standards The laws/framework behind Financial Accounting Mandatory for “Companies” Visit- http://www.takshilalearning.com Youtube- https://www.youtube.com/c/takshilalearning

  2. Definition Written policy documents- issued by “ Institute of chartered Accountants of India” Cover aspects of : Treatment Presentation RecognitionMeasurement Disclosure

  3. Objectives (True & Fair View)

  4. Benefits Reduction in ConfusionEasy comparison Disclosure of all informations ( including not required by statute)

  5. Limitations Alternative solutions ( difficult choice between standards) Trend towards rigidity Accounting standards cannot override the statute

  6. Overview Accounting Standards Issued by “ICAI” Issued standards-32 formulated by “ASB” set up on 21st April,1977 In force standards-31 Notified Standards : 29 ( by MCA)

  7. Overview A draft is prepared of accounting standards after comments from experts of various fields. Advisory committee: “ NACAS”

  8. List of Accounting Standards AS-1 : Disclosure of Accounting Policies AS-2 : Valuation of Inventories AS-3 : Cash Flow Statements AS-4 : Contingencies and Events Occurring after the Balance Sheet AS-5 : Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies AS-6 : Depreciation Accounting AS-7 : Accounting for Construction Contracts AS-9 : Revenue Recognition AS-10 : Accounting for Fixed Assets AS-11 : The Effects of Changes in Foreign Exchange Rates AS-12 : Accounting for Government Grants AS-13 : Accounting for Investments AS-14 : Accounting for Amalgamations AS-15 : Employee Benefits AS-16 : Borrowing Costs

  9. List of Accounting Standards AS-17 : Segment Reporting AS-18 : Related Party Disclosures AS-19: Leases AS-20 : Earnings per Share AS- 21: Consolidated Financial Statements AS-22 : Accounting for Taxes on Income AS-23 : Accounting for Investments in Associates in consolidated financial statements AS-24 : Discontinuing Operations AS-25 : Interim Financial Reporting AS-26 : Intangible Assets AS-27 : Financial Reporting of Interests in Joint Ventures AS-28 : Impairment of Assets AS-29 : Provisions, Contingent Liabilities & Contingent Assets AS-30 : Financial Instruments: Recognition & Measurement AS-31 : Financial Instruments: Presentation AS-32 : Financial Instruments: Disclosures

  10. Notes AS-8 “ Accounting for research & development” – withdrawn & merged with AS-26 “ Intangible assets” AS-30,31 & 32 – Not notified by “Ministry of corporate Affairs”

  11. Notes Applicability of Accounting Standards depends on Level of Companies: Note : Level 1 & 2 : Small & Medium Sized Companies

  12. Notes • Level 1 : • Turnover(excl other income) of 50 Crores or above • Borrowings (incl deposits): 10 cr or more • Listed companies or are in process of listing. • Level 2 : • Turnover(excl other income) of 40 lakhs-50Cr • Borrowings (incl deposits): 1Cr – 10 Cr. • Level 3 : Companies other than in Level 1 &2 Notes : All Accounting standards are compulsory for Level 1 Companies. AS-3,17,18,24 (only for Level 1 cos.)

  13. Accounting Standard-1 “Disclosure of Accounting Policies” accounting policies to be fully disclosed in the “notes to accounts” Selection of policies through - Prudence, Substance over Form & Materiality No disclosure of Fundamental Accounting assumptions (if followed)

  14. Accounting Standard-2 “Valuation of Inventories” Valuation – “Cost/NRV whichever is lower” (based on Conservatism Concept)

  15. Accounting Standard-2 Valuation to be applied on item by item basis. Cost of inventory: • Purchase cost • Cost of conversion • Cost of bringing the goods to the present location of the factory Net Realizable Value : Realizable Value – Selling Expenses

  16. Accounting Standard-3 “ Cash Flow Statements” Statement showing movement of Cash in & out of the business through three activities: Operating Activity Financing Activity Investing Activity

  17. Accounting Standard-9 “Revenue Recognition”- when work completed Recognition of revenue arising in the course of ordinary activities. Sale (recognized as revenue) Complete Sale Risks & Rewards transferred Consideration fixed (Delivery done) to buyer (guarantee of receipt)

  18. Amendments To bring uniformity in Accounts round the world, “ International Financial Reporting Standards” are being applied worldwide. India not applied IFRS till now, so have issued Converged AS- IND AS Applicable: from 1st April,2016 Listed Cos. and unlisted companies having net worth in excess of Rupees 500 crore

  19. MCQs Q.1. AS-2 is on:

  20. MCQs Q.2. Accounting Standards

  21. MCQs Q.3. As per AS-3, which of the following, should be classified as an investing activity?

  22. MCQs Q.4.Select the correct equation:

  23. MCQs Q.5. Revenue is generally considered as realized.

  24. MCQs Q.6. The accounting standards are mandatory for :

  25. MCQs Q.7. Provision for bad debts is the application of which of the following concept convention

  26. MCQs Q.8. As per AS-1, the fact need not be disclosed in the financial statements if the following concept is followed.

  27. MCQs Q.9. Economic life of an enterprise is split into the periodic interval as per –

  28. MCQs Q.10. Selection of Accounting policies appropriation is not based on :

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