Accounting Standards in Corporate Accounting: Overview of Key AS/Ind AS Concepts Used in Company Accounts Questions

Question 1

What are accounting standards?

Accepted Answer

Accounting standards are authoritative **principles and rules** that prescribe the recognition, measurement and disclosure of accounting transactions for preparing financial statements.

Question 2

State one objective of accounting standards.

Accepted Answer

One objective is to ensure **uniformity and comparability** of financial statements across companies and years.

Question 3

Name any one fundamental accounting assumption.

Accepted Answer

Going concern (or accrual, or consistency) is a fundamental accounting assumption.

Question 4

What is meant by going concern assumption?

Accepted Answer

Going concern assumes the business will **continue** in the foreseeable future and is not intended to be liquidated.

Question 5

Define materiality in accounting.

Accepted Answer

Materiality means information should be disclosed if its omission or misstatement could **influence decisions** of users of financial statements.

Question 6

Accounting standards help in ensuring a true and fair view.

Accepted Answer

True. Standards provide consistent recognition and disclosure rules, supporting **true & fair** reporting.

Question 7

Explain any three reasons why accounting standards are needed in corporate reporting.

Accepted Answer

Accounting standards are needed to (any three):

- ensure **uniformity** in accounting treatment
- improve **comparability** across companies/years
- reduce **manipulation/subjectivity** and improve reliability
- ensure adequate **disclosure** for stakeholders

Thus, standards increase confidence in corporate financial statements.

Question 8

Differentiate between AS and Ind AS at a broad level (any three points) using a table.

Accepted Answer

AS vs Ind AS (broad level):

| Basis | **AS** | **Ind AS** |
|---|---|---|
| Alignment | local framework | more **IFRS-aligned** |
| Approach | often more rule-based | more principle-based |
| Measurement | more historical cost focus | more fair-value use in some areas |

(Exact differences depend on the specific standard.)

Question 9

Explain accrual concept and matching concept (brief) with a small table.

Accepted Answer

Accrual vs Matching:

- **Accrual**: record income/expense when earned/incurred, not when cash moves.
- **Matching**: recognise expenses in the same period as related revenues.

| Concept | **Focus** | Example |
|---|---|---|
| Accrual | timing of recognition | outstanding expenses recorded |
| Matching | relate cost with revenue | sales commission with sales |

Both improve correct period reporting.

Question 10

Explain the reporting flow: recognise → measure → present → disclose, using a simple flowchart and example line.

Accepted Answer

Reporting flow:

Flowchart: Identify transaction → **Recognise** → **Measure** → **Present** → **Disclose**

Example (simple): Provision for doubtful debts
- Recognise a probable loss
- Measure using expected loss estimate
- Present as reduction of receivables/provision
- Disclose policy/notes if material

This flow helps write structured exam answers.

Question 11

Explain prudence with one example and present it in a small table.

Accepted Answer

**Prudence** means exercising caution so that assets/income are not overstated and losses are recognised when they are probable.

Example: **Provision for doubtful debts** is created based on expected non-recovery.

| Item | Treatment under **prudence** |
|---|---|
| Expected loss | recognise by **provision** |
| Uncertain gain | do not recognise until realised |

Thus, prudence supports reliable reporting.

Question 12

Explain consistency concept and how a change in accounting policy should be handled (brief) using a flow/table.

Accepted Answer

**Consistency** means using the same accounting policies from year to year to improve **comparability**.

If policy changes, it should be justified and disclosed.

Flow: Policy change needed → state **reason** → apply new policy → disclose **nature + effect**

| Requirement | What to do |
|---|---|
| Change in policy | disclose **reason** |
| Impact | disclose **effect** on financials (if material) |

Hence, consistency does not prohibit change; it requires proper disclosure.

Question 13

Explain fundamental accounting assumptions (going concern, consistency, accrual) and their impact (exam-style).

Accepted Answer

### Fundamental assumptions
1) **Going concern**: business continues in future.
- Impact: assets are not valued at forced-sale values; depreciation is meaningful.

2) **Consistency**: same accounting policies used year to year.
- Impact: improves **comparability**; any change must be disclosed with reasons/effect.

3) **Accrual**: record transactions when earned/incurred.
- Impact: shows correct period profit by recognising outstanding/prepaid items.

| Assumption | **Keyword** | Impact |
|---|---|---|
| Going concern | continuity | no forced-sale valuation |
| Consistency | comparability | disclose changes |
| Accrual | timing | correct period profit |

### Conclusion
These assumptions form the base of reliable corporate financial reporting.

Question 14

Explain qualitative concepts: materiality, prudence and substance over form (exam-style) with a table and conclude.

Accepted Answer

### Key qualitative concepts
- **Materiality**: disclose items that influence decisions.
- **Prudence**: provide for expected losses; avoid overstating income/assets.
- **Substance over form**: record economic reality over legal form.

| Concept | **One-line meaning** | Example |
|---|---|---|
| Materiality | disclose decision-relevant info | separate disclosure of large contingent liability |
| Prudence | anticipate losses | provision for doubtful debts |
| Substance over form | economic reality | finance lease treated like asset + liability (conceptually) |

### Conclusion
Using these concepts improves faithful representation and prevents misleading reporting.

Question 15

Discuss how accounting standards support comparability and transparency in company accounts (include a flow/table).

Accepted Answer

### How standards help
Accounting standards reduce diversity in accounting choices and ensure minimum disclosures.

### Mechanism (flow)
Business transaction → apply standard for **recognition/measurement** → present consistently → **disclose** policies/estimates → users compare across companies/years

| Area | What standards ensure |
|---|---|
| Recognition | what to record and when |
| Measurement | how to value items |
| Disclosure | what notes/policies to provide |

### Conclusion
Therefore, standards increase **comparability** and **transparency**, supporting true & fair financial reporting.

Accounting Standards in Corporate Accounting: Overview of Key AS/Ind AS Concepts Used in Company Accounts

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