📘 Chapter Summary: Introduction to Accounting Standards

Accounting Standards are written policies and guidelines issued by expert bodies like ICAI (The Institute of Chartered Accountants of India) to standardize accounting practices. They aim to ensure consistency, comparability, transparency, and fairness in financial reporting across different businesses and industries.

🔍 Key Concepts Covered

• Meaning: Standards for recognition, measurement, and disclosure of accounting transactions.
• Purpose: To eliminate inconsistencies and improve the reliability of financial statements.
• Advantages: Enhances comparability, improves reporting quality, resists manipulation, and aids decision-making.
• Disadvantages: Can be rigid, increase compliance cost, and limit flexibility.
• Formation of ASB: Accounting Standards Board formed by ICAI in 1977 with members from government, industry, and academics.
• Procedure to Issue AS: Drafting by ASB → Exposure draft → Public comments → Council approval → Final standard.
• Mandatory Compliance: All commercial entities must comply, and auditors must disclose any deviation.
• Types of Standards: India has 31 active standards (AS-1 to AS-32 excluding AS-8).
• Global Standards: IND-AS aligns Indian standards with IFRS and IAS.

❓ 50 Important Questions & Answers

📌 A. Multiple Choice Questions (Q1–Q10)

Accounting standards are issued by:

✅ ICAI

The first Accounting Standard in India is:

✅ AS-1

Which body formulates accounting standards in India?

✅ Accounting Standards Board (ASB)

How many current Accounting Standards are notified by ICAI?

✅ 31

Which standard deals with Depreciation Accounting?

✅ AS-6

The withdrawn standard AS-8 was replaced by:

✅ AS-26

Which principle says “Anticipate no profit, but provide for all losses”?

✅ Conservatism

Who audits compliance of accounting standards?

✅ Chartered Accountants

Which of these is an international body issuing accounting standards?

✅ IASB

AS-10 relates to:

✅ Accounting for Fixed Assets

📌 B. Very Short Answer (Q11–Q20)

Define accounting standards.

👉 Written guidelines for preparing and presenting financial statements.

What is the main purpose of AS?

👉 To eliminate inconsistency and enhance comparability.

What is ASB?

👉 Accounting Standards Board formed by ICAI to draft standards.

Name one limitation of accounting standards.

👉 They can be rigid or bureaucratic.

What is the full form of IFRS?

👉 International Financial Reporting Standards

How many members are there in ASB?

👉 Broad-based including ICAI, Govt, Industry, SEBI, RBI, etc.

What is IND-AS?

👉 Indian Accounting Standards converged with IFRS.

Who ensures compliance with AS in audit?

👉 Statutory Auditor

What is meant by ‘Exposure Draft’?

👉 A draft standard released for public comment.

What does AS-2 cover?

👉 Valuation of Inventories

📌 C. Short Answer (Q21–Q40)

List any two advantages of accounting standards.

👉 (i) Improved reliability, (ii) Comparability across enterprises

Name four interested users of financial statements.

👉 Bankers, Shareholders, Creditors, Government

What is the procedure to issue an accounting standard?

👉 Draft → Review → Exposure → Feedback → Finalization by ICAI

Mention two disadvantages of accounting standards.

👉 Costly implementation, limited flexibility

What is the objective of ASB?

👉 To evolve and recommend standards suitable for Indian conditions.

What is meant by comparability in accounting?

👉 The ability to compare financial reports of different enterprises.

What happens in case of non-compliance with AS?

👉 Auditor reports the deviation in audit report.

Why are accounting standards mandatory?

👉 To ensure uniform and fair presentation of financial reports.

Name any two accounting standards.

👉 AS-1: Disclosure of Accounting Policies, AS-9: Revenue Recognition

Who appoints the members of ASB?

👉 ICAI and Nominated Government and Professional bodies.

What is the scope of accounting standards?

👉 Applies to all commercial, industrial, and business enterprises.

Why was AS-8 withdrawn?

👉 It was merged into AS-26 on Intangible Assets.

How many IND-AS are currently in force?

👉 Over 40 IND-AS (aligned with IFRS)

Give one example of convergence between IAS and IND-AS.

👉 IAS-1 (Presentation of Financial Statements) → IND-AS 1

What is meant by disclosure in accounting?

👉 Providing necessary information to users in financial reports.

Explain the term ‘Recognition’ in AS.

👉 Including an item in financial statements.

What is the use of AS in taxation?

👉 Ensures consistent income reporting and compliance.

Who are internal users of financial statements?

👉 Managers, Employees, Owners

What is the difference between IND-AS and AS?

👉 IND-AS are IFRS-based; AS are Indian-only GAAP.

What is AS-11 about?

👉 Effects of changes in foreign exchange rates.

📌 D. Long Answer Type (Q41–Q50)

1. Explain the objectives of accounting standards.
2. Discuss the formation and structure of ASB.
3. Describe the advantages and disadvantages of AS.
4. Elaborate the procedure of issuing an Accounting Standard.
5. What are the duties of auditors in case of AS non-compliance?
6. Classify users of financial statements and their interests.
7. Discuss the significance of global standards like IFRS.
8. What is the role of disclosure in financial transparency?
9. Compare Accounting Standard and IND-AS.
10. List any 10 Accounting Standards issued by ICAI.

✅ Conclusion

Accounting Standards bring clarity, consistency, and comparability to financial reporting. Chapter 1 of Class 11 provides a strong base for understanding the purpose, scope, and procedure behind creating these standards. The above 50 questions ensure strong preparation for board exams and commerce-related competitive tests.