The main objective of the preparation of financial statements is to summarise the financial position of a business enterprise for an accounting period in monetary terms. In order to compare the financial position of an enterprise with that of another enterprise, there needs to be consistency in the method of preparation of financial statements across various companies. In order to make these methods and principles uniform and consistent across organizations, the accounting standards have evolved. The meaning of Accounting Standards is discussed below
Meaning of Accounting Standards
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.
According to Kohler, “A code of conduct imposed on an accountant by customs, law and professional bodies”
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What is Objectivity Principle?
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.
What is Correlation?
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’.