[Commerce Class Notes] on Accounting Standards – Objectives, Benefits, Limitations Pdf for Exam

While discussing the importance of stakeholders within any given realm of financial investment and procedure, it is imperative to consider that the aspect of financial statement plays an important role in financing. Therefore, when the question of “What do you mean by accounting standards?” gets addressed, it is imperative to analyse the question with regards to accounting procedures along with their explanations. 

So, to understand accounting, these terms and procedures will be briefly discussed beforehand. Therefore, with regards to the question of “What are Accounting standards?” the answer shall be discussed here on. 

What is meant by Accounting?

To put it bluntly, accounting can be defined as the activity of measuring, processing and communicating financial as well as non-financial information with regards to the economic facets of businesses and corporations. Therefore, accounting refers to the process of keeping track and records of the transactions that occur at a business. 

What is Accounting Standards?

In order to proceed with the discussion of understanding accounting standards objectives benefits limitations, the aspect of accounting standards must be defined upfront. Accounting Standards (AS) are generally defined as authoritative standards with which financial statements are presented, measured, disclosed and recognized for transactions that occur within the market. 

Accounting standards are, in effect, the primary source for the Generally Accepted Accounting Principles or GAAP. And that is where the second question of “What is GAAP?” arises. Let us, therefore, define GAAP.

What is GAAP?

Generally Accepted Accounting Principles or GAAP are referred to the financial practices and procedures that are used primarily in the United States and are interchangeably known as U.S. GAAP. The utilization of GAAP enables businesses in a market to conduct their operations through presenting financial reporting to existing and potential investors in order for them to make ethical and rational decisions regarding financing, investment, credits, etc. 

However, as stated above, GAAP is the most used in the United States and although it has proven to be largely effective, other nations have resorted to a newer accounting standard, known as IFRS which leads to the question “What is IFRS in Accounting?” Therefore, this accounting standard shall thereby be discussed here on. 

What is IFRS?

According to its definition, IFRS or the International Financial Reporting Standards are used to refer to the accounting standards that have been issued in order to describe a company’s performance in an industry or market with regards to its financial stability and market positioning. The Indian Accounting Standards cater to this financial reporting process as well.

What is Ind AS?

As stated earlier, the Indian Accounting Standards or Ind AS refers to the financial reporting standards that are used in India with regards to the processing and recording the financial proceedings in businesses and corporations of India. 

What is International Accounting?

International accounting is referred to the older accounting standards which were put into use in order to promote transparency and compatibility among businesses. 

What is Hedge Accounting?

In the practices of accountancy, Hedge accounting is referred to the specific practice of providing an account of the profit and/or loss of market entries. 

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