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 Main Objectives of Accounting Standards are
Objectives of Accounting Standards
We establish standards in order that we will compare our performance with something which is uniform for all. For example, Our marks are expressed in percentage which is a common unit of measurement for all so that the students can compare their performance with other students during the year. Similarly, these accounting standards are followed universally and this thus, makes a comparison between the two firms possible.
Financial statements are the only source for the stakeholders to know about the business. These accounting standards ensure that they are prepared in a manner that people can rely on and make sense out of them. For example, researchers trying to understand the corporate governance practices of the business can rely on these statements.
Imagine a situation wherein a classroom the teacher asks her students to study at their own will. In such a case, it would only lead to a ruckus in the class. Similarly, if accounting policies and practices are left at the discretion of the business entities then they could go haywire and there’ll be no uniformity in the least. As a result, of these standards, the diverse practices have been kept at bay.
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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’.