Accounting Standards
— Rulebook for Accounts
Why AS? · 3 Key Benefits · 29 issued, 27 effective · Ind AS & Global Standards
📝 Handwritten Class Note
CA Devesh Thakur’s handwritten note for Day 7 — save it for quick revision!
🎬 Watch Day 7 Reel on Instagram
Accounting Standards — Day 7
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Accounting Standards explained — Why AS, 3 benefits, 29 issued 27 effective, Ind AS & IFRS. Day 7 of 50 Days Accounting Challenge 📜
▶ Watch Day 7 Reel on InstagramDay 7: Accounting Standards — The Rulebook for Accounts
In the first 6 days we built a strong vocabulary of accounting terms. From Day 7, we step into rules & frameworks — starting with Accounting Standards (AS). These are the official rules that every business must follow while preparing its accounts. Without them, every company could show whatever it wanted — creating chaos for investors, banks, and the government. Let’s understand why AS exist and what they do! 📜
What are Accounting Standards?
Accounting Standards (AS) ek set of rules aur guidelines hain jo batate hain ki financial transactions ko accounts mein kaise record karein, kaise present karein, aur kya disclose karein. India mein yeh rules ICAI (Institute of Chartered Accountants of India) issue karta hai.
❓ Why Do We Need Accounting Standards?
Without AS — Confusion
- Every company follows its own method
- No uniformity in financial reporting
- Investors cannot compare two companies
- Companies could manipulate accounts easily
- Banks & lenders cannot trust financial data
With AS — Order & Clarity
- Uniformity — Same rules for all companies
- Comparability — Compare any two companies easily
- Transparency — All important info disclosed
- Trust for investors, banks & stakeholders
- Reduces chances of financial fraud
🌟 3 Key Benefits of Accounting Standards
Standardisation
Sabke liye same rules — chahe company badi ho ya choti. Ek hi method use karna mandatory hai, jisse accounts consistent aur reliable hote hain.
Disclosure
Important information zaroori batana — jo bhi material (important) information hai, use accounts mein disclose karna mandatory hai. Kuch bhi hide nahi kar sakte.
Comparability
Accounts ko compare karna possible hota hai — two types:
📊 Intra-Company
Same company ke different years ke accounts compare karo → growth track karo
🔄 Inter-Company
Different companies ke accounts compare karo → best investment decide karo
⚖️ Conflict Rule — Law vs AS
Agar Law aur AS mein Conflict Ho → Law Prevails!
Kabhi kabhi Accounting Standard aur Companies Act ya koi aur Law mein aapas mein conflict ho sakta hai — matlab dono alag alag bol rahe hon ki kuch kaise treat karein. Aise case mein hamesha Law ko priority milti hai — AS ko nahi. Law is supreme.
📌 Law > Accounting Standards — always🔢 How Many Accounting Standards?
AS issued by ICAI — The Numbers
❌ Withdrawn Standards Withdrawn
AS 6 — Depreciation Accounting
Withdrawn & merged into AS 10 (Property, Plant & Equipment)
AS 8 — Research & Development (R&D)
Withdrawn & merged into AS 26 (Intangible Assets)
✅ Key Active Standards Effective
AS 10 — Property, Plant & Equipment (PPE)
Now covers depreciation rules (absorbed AS 6)
AS 26 — Intangible Assets
Now covers R&D costs (absorbed AS 8)
Why were AS 6 and AS 8 Withdrawn?
AS 6 (Depreciation) and AS 8 (R&D) were merged into broader standards — AS 10 (PPE) and AS 26 (Intangible Assets) respectively — to align with international standards and avoid duplication. This is why ICAI issued 29 but only 27 are effective.
🌐 Global — Ind AS & IFRS
🌍 India Goes Global — Ind AS
🇮🇳 What is Ind AS?
Ind AS = Indian Accounting Standards — yeh ek upgraded set of standards hai jo global standards ke aligned hain. Yeh AS se alag aur advanced hain.
Indian Accounting Standards🏢 Mandatory For Whom?
Ind AS certain companies ke liye mandatory hai — jaise listed companies, large companies (net worth ≥ ₹250 crore), aur banking/insurance companies.
Large & Listed Companies🌐 Global Standard
Ind AS = Global Standard kyunki yeh IFRS (International Financial Reporting Standards) ke saath aligned hai — jo poori duniya mein use hota hai.
IFRS Aligned📋 AS vs Ind AS
AS = Traditional Indian standards (smaller companies). Ind AS = Globally aligned, more detailed (larger companies). Dono ICAI ke under hain.
AS < Ind AS < IFRSConnection with Previous Days
Day 2: AS 10 covers Fixed Assets (PPE) — depreciation rules now under AS 10, not AS 6.
Day 6: Depreciation Accounting was AS 6 — now merged into AS 10.
Day 2: AS 26 covers Intangible Assets — Goodwill, Patents, Copyrights — exactly what we learned!
📊 Quick Summary — Accounting Standards
| Concept | Key Point | Detail |
|---|---|---|
| Without AS | Confusion | Every company follows its own method — no comparison possible |
| With AS | Uniformity + Comparability + Transparency | Standardised rules for all → trust & reliability |
| Benefit 1: Standardisation | Same rules for all | Eg: FIFO or Weighted Average for stock valuation |
| Benefit 2: Disclosure | Important info batana zaroori | Eg: Dep. method, Inventory valuation — must be disclosed |
| Benefit 3: Comparability | Intra (same co., diff years) + Inter (diff companies) | Investors can make informed decisions |
| Conflict Rule | Law vs AS → Law Prevails | Companies Act > Accounting Standards |
| Total AS Issued | 29 AS by ICAI | AS 6 (Dep.) + AS 8 (R&D) withdrawn → 27 effective |
| Ind AS | Global Standard — IFRS Aligned | Mandatory for listed & large companies in India |
