Model Paper 4 — Account STD 11 Commerce — Question

Accounting is often considered the language of business, as it communicates to others the financial position of the company. And like every language has certain syntax and grammar rules the same is true here. These rules in the case of accounting are the
Accounting Standards (AS). They are the framework of rules and regulations for accounting and reporting in a country. Let us see the main objectives of forming these standards.
i. The main aim is to improve the reliability of financial statements. Now because the financial statements have to be made following the standards the users can rely on them. They know that not conforming to these standards can have serious consequences
for the companies.
ii. Secondly it facilitates the comparability. Following these standards will allow for inter firm and intra-firm comparisons. This allows us to check the progress of the firm and its position in the market.
iii. It also looks to provide one set of accounting policies that include the necessary disclosure requirements and the valuation methods of various financial transactions.