Accounting Standards plays an important role in maintaining the accounts. For better understanding the concept, you have to know more about its objectives and its benefits. You have to follow the article to get better knowledge.
Meaning of Accounting Standards
Accounting Standards comprise accounting guidelines and rules required to be followed while preparing financial statements. Also, these standards are closely related to Generally Accepted Accounting Principles (GAAP). These standards provide detailed and clear rules for the accounting treatment of various business transactions. Moreover, it helps achieve standardization and homogeneity in internal and external record-keeping and reporting purposes.
Objectives/Needs of Accounting Standards
Accounting Standard is intended to standardize accounting procedures and reporting methods. At the same time, these standards are also flexible enough to change in tune with the change in the environment.
i) Accounting Standards seek to harmonize a myriad of practices followed to record and present financial transactions, which help compare companies.
ii) It helps in making financial statements more consistent and comparable.
iii) Increases the utility of financial statements.
iv) Helps in producing useful and timely information for various stakeholders.
Also Read: Accounting Principles
Benefits of Accounting Standards
1. Decreases Deviations
Accounting Standard help decrease instances of deviation between the treatment of various accounting transactions. Also, it helps make uniform financial statements.
2. Better Reporting
Accounting Standards help provide a better picture of the financial situation of the concern. It generally offers wider disclosure than required by law.
3. Makes Comparison Easier
Accounting Standard help homogenize, record, and report financial transactions. Also, it makes comparison easier between similar occurrences of companies located in the same or different countries. However, it should be observed that the reporting may differ due to various legal requirements followed in other countries.