Accounting Standards are the statements of code of practice from the regulatory accounting bodies that are to be observed within the preparation and presentation of monetary statements. In layman’s terms, accounting standards are the written documents issued by the expert institutes (ICAI) or other regulatory bodies covering various aspects of measurement, treatment, presentation, and disclosure of accounting transactions. The benefits of Accounting Standards are
Benefits of Accounting Standards
Elimination of variation in accounting treatment: Accounting standards eliminate variations in accounting treatment as it works on a set of accounting principles and methods which are followed throughout the entire accounting fraternity. These standards are uniformly followed which further eliminates variation in the preparation and presentation of books of accounts.
Full disclosure of accounting principles: AS-1 requires full disclosure of accounting principles and policies which are helpful for the various users of accounting information such as present and potential investors of a business. However, such information may not be compulsory for disclosure by the law of the country.
Inter and Intra firm comparison: They form a strong base for comparison of books of accounts maintained by different departments within firms (Intra) or between two different firms (Inter).
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According to the objectivity principle, accounting should be free from personal bias. That is, the accounting transaction should be supported with written documents such as cash memos, invoices, etc.
Correlation is a statistical tool that measures the quantitative relationship between different variables. It studies the degree and intensity of the connection between the two variables. The relationship between two variables is studied with the help of a statistical tool i.e. ‘Correlation’.