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Theory Base of Accounting,
CHAPTER Accounting Standards and Indian
CHAPTER

3 Accounting Standards (Ind-AS)

MEANING OF KEY TERMS USED IN THE CHAPTER

1. Generally Accepted Generally Accepted Accounting Principles are basic or fundamental
Accounting Principles propositions accepted by the accountants based on which transactions
(GAAP) are recorded in the books of account and financial statements
are prepared.

2. Fundamental Accounting Assumptions
i. Going Concern Under the assumption, it is presumed that the business will continue
Assumption for a foreseeable future and there is no intention to close down the business
or scale down its operations significantly.

ii. Accrual Assumption Under the assumption, a transaction is accounted at the time when it is
entered into and not when settlement takes place.

iii. Consistency Under the assumption, accounting practices once adopted should be
Assumption applied consistently year after year. They may be changed under following
three conditions:
(a) Law requires the change,
(b) Accounting standard requires the change, or
(c) It will result in more fair presentation of financial affairs of the business.

3. Accounting Accounting Standards are the written policy documents covering the
Standards aspects of recognition, measurement, treatment, presentation and disclosure
of accounting transactions in the financial statements.
4. International Financial International Financial Reporting Standards (IFRS) are a set of
Reporting Standards accounting standards issued by IASB based on sound and clearly
(IFRS) stated principles.

CHAPTER SUMMARY

• Accounting Principles: Accounting is the language of business. To understand the
accounting information and for maintaining uniformity and consistency, accounting principles
are necessary in accounting.
Accounting Principles are the norms or rules which are to be followed in treating various
items of assets, liabilities, expenses, incomes, etc.