Answer :
Accounting is the process of recording financial transactions pertaining to a business. The accounting process includes summarizing, analyzing, and reporting these transactions to eversight agencies, regulators, and tax collection entities.
2. Explain the role of accounting standards!
Answer:
1. Bringing the uniformity in accounting methods
Accounting standards are required to bring uniformity in accounting methods by proposing treatments to the accounting issue. For example, AS-6(revised) states the methods for depreciation accounting.
2. Improving the reliability of the financial statements
Accounting is the language of the business. There are many users of the information provided by accountants who take various decisions relating to their filed just on the basis of information contained in financial statements should show true and fair view of the business concern. Accounting standards when used give a sense of faith and reliability to various users.
3. Simplify the accounting information
Accounting standards prevent the users from reaching any misleading conclusions and make the financial data simpler for everyone. For example, accounting standards- 3 (Revised) clearly classifies the flows of cash in terms of operating activities, investing activities and financing activities.
4. Prevent frauds and manipulations
Accounting standards prevent manipulations of data by the management and others. By codifying the accounting methods, frauds and manipulations can be minimized.
5. Helps auditors
Accounting standards lay down the terms and conditions for accounting policies and practices by way of codes, guidelines and adjustment for making and interpreting the items appearing in the financial statements. Thus, these terms, policies and guidelines, etc. become the basis for auditing the books of accounts.
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