2. Bookkeeping and Accounting both are used interchangeably in
the financial world, but there is a difference between
bookkeeping and accounting. Bookkeeping is a part of
accounting whereas accounting itself is a wider concept.
Bookkeeping
A bookkeeper is someone who’ll accurately record financial
data of a business. They’ll make sure that every entry is correct
while logging all of the transactions in the books. In simple
terms, bookkeepers record and organise all financial data.
However, this can often be done monthly, quarterly or even
annually.
Accountant
Accountants are mainly responsible for generally overseeing
accounts and producing financial statements and tax returns
that comply with the law. Accountants will adjust entries made
by bookkeepers at the end of each fiscal period to help make
more informed business decisions.
Fundamentals of Book Keeping
3. Definition of Accounting
Definition by the American Institute of Certified Public Accountants (Year 1961):
“Accounting is the art of recording, classifying and summarizing in a significant manner and in
terms of money, transactions and events which are, in part at least, of a financial character, and
interpreting the result thereof”.
• Providing Information to the Users for
Rational Decision-making
• Systematic Recording of Transactions
• Ascertainment of Results of above
Transactions
• Ascertain the Financial Position of
Business
• To Know the Solvency Position
Objectives of Accounting
Function of
Accounting
Measure
ment
Forecastin
g
Decision-
making
Comparis
on &
Evaluation
Control
Governm
ent
Regulatio
n and
Taxation
4.
5.
6.
7.
8.
9. Accounting Concepts and Conventions
Accounting concepts are the rules and regulations of accounting, while accounting
convention is the set of practices discussed by the accounting bodies before preparing
final accounts.
10.
11.
12. Accounting Standards (AS)
Accounting Standards (AS) are basic policy documents. Their main aim is to ensure transparency, reliability,
consistency, and comparability of the financial statements. They do so by standardizing accounting policies and principles of
a nation/economy. So the transactions of all companies will be recorded in a similar manner if they follow these accounting
standards.
Accounting Standards mainly deal with four major issues of accounting, namely
Recognition of
financial events
Measurement of
financial
transactions
Presentation of
financial
statements in a
fair manner
Disclosure
requirement of
companies to ensure
stakeholders are not
misinformed
Need of Accounting Standard :
♦ Accounts give information to various groups.
♦ The financial statement can serve the interest of different interest groups only if there is uniformity and full
disclosure of relevant information.
♦ There are various alternatives regarding accounting treatment and valuation norms which may be used by an
entity.
♦ Hence AS tries to reduce this alternative by allowing only those alternatives which fulfils the basic qualitative
characteristics of true and fair financial statements and lays down the minimum information to be disclosed and
manner of disclosure.
13. Brings Uniformity In Accounting System
Easy Comparability Of Financial Statements
Assists Auditors
Makes Accounting Informative Easy & Simple
Avoids Frauds & Manipulations
Provides Reliability To Financial Statements
Measures Management Performance
Importance of Accounting Standards
To provide a standard for the diverse
accounting policies and principles.
To put an end to the non-comparability of
financial statements.
To increase the reliability of the financial
statements.
To provide standards which are transparent for
users.
To define the standards which are comparable
over all periods presented.
To provide a suitable starting point for
accounting.
It contains high quality
information to generate the financial reports.
This can be done at a cost that does not exceed
the benefits.
For the eradication the huge amount of
variation in the treatment of accounting
standards.
To facilitate ease of both inter-firm and intra-
firm comparison.
Objective of Accounting Standards
defined by ICAI
14. Benefits of Accounting Standards
Attains Uniformity in Accounting
Improves Reliability of Financial Statements
Prevents Frauds and Accounting Manipulations
Assists Auditors
Comparability
Determining Managerial Accountability
Limitations of Accounting Standards
Difficulty between
Choosing
Alternatives
Restricted Scope
15. Accounting Standards In India
⁂ The Institute of Chartered Accountants of India (ICAI), being a premier accounting body in
the country, took upon itself the leadership role by constituting the Accounting
Standards Board (ASB) on 21st April 1977.
⁂ The ICAI has taken significant initiatives in the setting and issuing procedure of
Accounting Standards to ensure that the standard-setting process is fully consultative and
transparent.
⁂ The ASB considers International Financial Reporting Standards (IFRSs) while framing
Indian Accounting Standards (ASs) in India and try to integrate them, in the light of the applicable
laws, customs, usages and business environment in the country.
⁂ The composition of ASB includes, representatives of industries (namely, ASSOCHAM,
CII, FICCI), regulators, academicians, government departments etc.
⁂ Although ASB is a body constituted by the Council of the ICAI, it (ASB) is independent in
the formulation of accounting standards and Council of the ICAI is not
empowered to make any modifications in the draft accounting standards formulated by
ASB without consulting with the ASB
16. Bodies that Govern Applicability of Ind As (Indian
Accounting Standards)
The following institutions govern the applicability of Ind
As which is required to be applied for all companies in
India
17. Objectives of Indian Accounting Standards (Ind As)
The following are the objectives of utilising Indian Accounting Standards:
¥ Ensures that companies in India adopt such standards to carry out international
recognised and best practices.
¥ Ensures that compliance is maintained across the globe.
¥ Have one framework related to unified accounting system.
¥ Such standards are developed on the principles of the IFRS. Hence this would be
a guide to the applicability of such standards.
¥ Accounting Systems which are utilised in India can be analysed and understood
by global companies.
¥ Through this financial statements and reports of companies would be transparent.
¥ Such standards are harmonised in order to ensure that the company is complying
with global requirements.
¥ More coverage can be adopted through these Indian Accounting Standards, as
Indian companies have increased their global reach when compared to the past.
18. Applicability of Ind As
The government of India and the Ministry of Corporate Affairs brought out a
notification related to the adoption and applicability of Indian Accounting Standards by all
companies in India. This notification was brought through a legislative enactment Companies
(Indian Accounting Standards (IND AS)) Rules 2015.
As per the above notification, all companies which receive this notification would
be required to adopt the Ind As in a phased manner in the financial year 2016-17. Ever since
the above enactment, there have been three amendments in the notification which occurred in
2016, 2017 and 2018.
Benefits of Adopting Indian Accounting Standards
19. Relationship of Indian
Accounting Standards
and International
Financial Reporting
Standards
IFRS stands for
International Financial
Reporting Standards, It
is prepared by the IASB
(International Accounting
Standards Board). It is
used in around 144
countries and is regarded
as one of the most popular
accounting standards.
IND AS is also known as
Indian Accounting
Standards or Indian
version of IFRS. Indian AS
or IND AS is used in the
context of Indian
companies.
IFRS IND AS
Definition
IFRS stands for International Financial Reporting
Standards, it is an internationally recognised
accounting standard
IND AS stands for Indian Accounting
Standards, it is also known as India
specific version of IFRS
Developed by
IASB (International Accounting Standards Board) MCA (Ministry of Corporate Affairs)
Followed by
144 countries across the world Followed only in India
Disclosure
Companies complying with IFRS have to disclose
as a note that the financial statements comply with
IFRS
Such a disclosure is not mandatory for
companies complying with Indian
Accounting Standards
Financial Statement Components
It includes the following
1. Statement of financial position
2. Statement of profit and loss
3. Statement of changes in equity for the period
4. Statement of cash flows for the period
It includes the following:
1. Balance Sheet
2. Profit and loss account
3. Cash flow statement
4. Statement of changes in equity
5. Notes to financial statements
6. Disclosure of accounting policies
Balance Sheet Format
Companies complying with IFRS need have
specific guidelines for preparing balance
sheet with assets and liabilities to be
Companies complying with IND AS need have
no such requirements for balance sheet format,
but the guidelines are defined for presenting
20. Indian Accounting Standards
1,2,6,10,26,24
List of ICAI’s Mandatory Accounting Standards (AS 1~29)
AS 1 Disclosure of Accounting Policies: This Standard deals with the disclosure of significant accounting policies
which are followed in preparing and presenting financial statements.
AS 2 Valuation of Inventories: This Standard deals with the determination of value at which inventories are carried
in the financial statements, including the ascertainment of cost of inventories and any write-down thereof to net
realisable value.
AS-6 (Revised) Depreciation Accounting – Removed
AS 10 Property, Plant and Equipment: The objective of this Standard is to prescribe the accounting treatment for
property, plant and equipment (PPE).
AS 26 Intangible Assets: AS 26 prescribes the accounting treatment for intangible assets (i.e. identifiable non-
monetary asset, without physical substance, held for use in the production or supply of goods or services, for rental to
others, or for administrative purposes).
AS 24 Discontinuing Operations: The objective of AS 24 is to establish principles for reporting information about
discontinuing operations, thereby enhancing the ability of users of financial statements to make projections of an
enterprise’s cash flows, earnings generating capacity, and financial position by segregating information about
discontinuing operations from information about continuing operations.
