Financial Accounting

Accounting Standards
By Gaurav Sharma Aakanksha Jain Chirag Arora Amrita Luthra

Indian Accounting Standards

ICAI constituted an Accounting Standard Board on 21st April, 1977. Function of ASB: to frame accounting standards which would be formally issued under the authority of Council of Institute of Chartered Accountants.

Importance of Accounting Standards

Presenting clear-cut accounts on a uniform basis Standards represent ideal practice of accounting. Ensure comparability of accounts Account show the clear position of the state of affairs

Accounting Standards Issued by ICAI

ASB has issued 29 standards. In line with the International standards.

AS 1: Disclosure of Accounting Policies

Deals with disclosure of significant accounting policies Accounting policies vary from enterprises to enterprises. Three fundamental assumptions
Going Concern Accrual Concept Consistency.

AS 2: Inventories
Inventories Three aspects of Inventory Valuation
Measurement of cost Measurement of net realizable value. Comparison between Cost and Net Realizable Value. Important Cost Formula

AS 3: Cash Flow Statement

Cash Flow statement Cash and cash Equivalent Types of Cash Flow
Cash flow from operating activities Cash flow from investing activities Cash flow from financial activities

AS 4: Contingencies and events occurring after the Balance Sheet Date.

Marked as a note under the Balance Sheet for future reference.
Contingencies. Events occurring after the Balance Sheet Date.

AS 5: Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies.
All income and expenses should be included in the determination of net profit or loss for the period unless an accounting standard requires or permits otherwise Prior period items. The change in the accounting policy should be made only if adoption of different policy is required or if the change is for the improvement of enterprise.

AS 6: Depreciation Accounting.
Depreciation assets are:
expected to be used more then one AY have a limited useful life Used in the production of supply and goods.

Depreciation cannot be applied to:

Forests and plantation Minerals, oils, natural gas etc. Expenditure on R&D

AS 7: Construction Contracts
The standard deals with the treatment of revenue and cost associated with construction contracts. A construction contract is a contract for the construction of an asset or of a combination of assets which together constitute a single project. Types of construction contracts:
Fixed price contract Cost plus contract

AS 8: Accounting for research and development:

This standard deals with the treatment of costs of research and development in financial statements. Cost incurred for research and development mainly includes the following:
Salaries , wages , and other related cost of personals. Cost of material and services consumed. Overhead costs Payment to outside bodies for R&D

AS 9: Revenue recognition
This standard deals with the bases for the recognition of revenue in the statement of profit and loss of an enterprise. It is only concerned with the recognition of revenue arising in the course of ordinary activities of the enterprise which are
The sale of goods The rendering of services The use by others of enterprise resources yielding interest , royalties and dividends.

AS 10: Accounting for Fixed Assets

ASSET is a resource :
Controlled by the enterprise as a result of past events, from which future economic benefits are expected to flow to the enterprise.

Fixed Asset
Tangible Fixed Assets Intangibles Capital Work In Progress