Unit 1

Meaning and Scope of Accounting

Accounting is basically the systematic process of handling all the financial transactions and
business records. In other words, Accounting is a bookkeeping process that records transactions,
keeps financial records, performs auditing, etc. It is a platform that helps through many processes,
for example, identifying, recording, measuring and provides other financial information.
Accounting is the language of finance. It conveys the financial position of the firm or business to
anyone who wants to know. It helps to translate the workings of a firm into tangible reports that
can be compared.
Accounting is all about the process that helps to record, summarize, analyze, and report data that
concerns financial transactions.
Accounting is all about the term ALOE. Do not confuse it with the plant! ALOE is a term that has
an important role to play in the accounting world and the understanding of the meaning of
accounting. Here is what the acronym, “A-L-O-E” means.
• A – Assets
• L – Liabilities
• E- Owner’s Equity
This is one of the basic concepts of accounting. The equation for the same goes like this:
Assets = Liabilities + Owner’s Equity
Here is the meaning of every term that ALOE stands for.
(i) Assets: Assets are the items that belong to you and you are the owner of it. These items
correspond to a “value” and can serve you cash in exchange for it. Examples of Assets are Car,
House, etc.
(ii) Liabilities: Whatever you own is a liability. Even a loan that you take from a bank to buy any
sort of asset is a liability.
(ii) Owner’s Equity: The total amount of cash someone (anyone) invests in an organization is
Owner’s Equity. The investment done is not necessarily money always. It can be in the form of
stocks too.

Scope of Accounting
Accounting has got a very wide scope and area of application. Its use is not confined to the business
world alone, but spread over in all the spheres of the society and in all professions. Now-a-days,
in any social institution or professional activity, whether that is profit earning or not, financial
transactions must take place. So there arises the need for recording and summarizing these
transactions when they occur and the necessity of finding out the net result of the same after the
expiry of a certain fixed period. Besides, the is also the need for interpretation and communication
of those information to the appropriate persons. Only accounting use can help overcome these
problems.
In the modern world, accounting system is practiced no only in all the business institutions but
also in many non-trading institutions like Schools, Colleges, Hospitals, Charitable Trust Clubs,
Co-operative Society etc.and also Government and Local Self-Government in the form of
Municipality, Panchayat.The professional persons like Medical practitioners, practicing Lawyers,
Chartered Accountants etc.also adopt some suitable types of accounting methods. As a matter of
fact, accounting methods are used by all who are involved in a series of financial transactions.
The scope of accounting as it was in earlier days has undergone lots of changes in recent times. As
accounting is a dynamic subject, its scope and area of operation have been always increasing
keeping pace with the changes in socio-economic changes. As a result of continuous research in
this field the new areas of application of accounting principles and policies are emerged. National
accounting, human resources accounting and social Accounting are examples of the new areas of
application of accounting systems.
• Functions of AccountingTo move ahead to the functions of accounting, first of all, it is
very important to know about the role of accounting. The basic role of accounting is to
provide relevant financial information to the businessmen and the stakeholders.
Furthermore, facilitating the decision making processes and keeping them updated. There
are two types of functions of accounting, first, historical functioning and second,
managerial functionals.Historical FunctionsHistorical functioning of accounting involves
keeping the accurate records of all the past transactions made in the business. This type of
functioning of accounting includes:Recording the financial transactions and maintain a
journal to keep them all.It is important to classify and separate the records and the
ledger.Preparation of brief summary takes place for the quick reviews.This type of
accounting gives the net result other than just keeping the records.Preparation of balance
sheet takes place to determine the financial position of the business.The analyzed data and
records are then used for other purposes.The last step is to communicate the obtained
financial information to the interested sectors, for instance, owners, suppliers, government,
researchers, etc.Managerial FunctionsIn an organization, the management committee
looks for all kind of decision making. To ensure that the decisions are smooth and
beneficial for everyone, they do an evaluation of the past records provided by accounting.
These are managerial functions. The five managerial functions of accounting
are:Formation of plans in addition to controlling the financial policies.Besides that, a
budget is prepared to estimate the total expenditure for future activities.Also, cost control
is made possible by comparing the cost with the efficiency of the work.The accounting also
provides the necessary information during the evaluation of employee’s performance.To
check for frauds and errors is what the workability of the whole procedure depends.
Functions of Accounting
To move ahead to the functions of accounting, first of all, it is very important to know about the
role of accounting. The basic role of accounting is to provide relevant financial information to the
businessmen and the stakeholders. Furthermore, facilitating the decision making processes and
keeping them updated. There are two types of functions of accounting, first, historical functioning
and second, managerial functionals.
Historical Functions
Historical functioning of accounting involves keeping the accurate records of all the past
transactions made in the business. This type of functioning of accounting includes:
• Recording the financial transactions and maintain a journal to keep them all.
• It is important to classify and separate the records and the ledger.
• Preparation of brief summary takes place for the quick reviews.
• This type of accounting gives the net result other than just keeping the records.
• Preparation of balance sheet takes place to determine the financial position of the business.
• The analyzed data and records are then used for other purposes.
• The last step is to communicate the obtained financial information to the interested sectors,
for instance, owners, suppliers, government, researchers, etc.
Managerial Functions
In an organization, the management committee looks for all kind of decision making. To ensure
that the decisions are smooth and beneficial for everyone, they do an evaluation of the past records
provided by accounting. These are managerial functions. The five managerial functions of
accounting are:
• Formation of plans in addition to controlling the financial policies.
• Besides that, a budget is prepared to estimate the total expenditure for future activities.
• Also, cost control is made possible by comparing the cost with the efficiency of the work.
• The accounting also provides the necessary information during the evaluation of
employee’s performance.

Objectives and Nature of Accounting

Objectives of Accounting
The following are the main objectives of accounting
1. To maintain full and systematic records of business transactions
Accounting is the language of business transactions. Given the limitations of human memory, the
main objective of accounting is to maintain ‘a full and systematic record of all business
transactions.
2. To ascertain profit or loss of the business
Business is run to earn profits. Whether the business earned profit or incurred loss is ascertained
by accounting by preparing Profit & Loss Account or Income Statement. A comparison of income
and expenditure gives either profit or loss.
3. To depict financial position of the business
A businessman is also interested in ascertaining his financial position at the end of a given period.
For this purpose, a position statement called Balance Sheet is prepared in which assets and
liabilities are shown.
Just as a doctor will feel the pulse of his patient and know whether he is enjoying good health or
not, in the same way by looking at the Balance Sheet one will know the financial health of an
enterprise. If the assets exceed liabilities, it is financially healthy, i.e., solvent. In the other case, it
would be insolvent, i.e., financially weak.
4. To provide accounting information to the interested parties
Apart from owner of the business enterprise, there are various parties who are interested in
accounting information. These are bankers, creditors, tax authorities, prospective investors,
researchers, etc. Hence, one of the objectives of accounting is to make the accounting information
available to these interested parties to enable them to take sound and realistic decisions. The
accounting information is made available to them in the form of annual report.

Nature of Accounting
We know Accounting is the systematic recording of financial transactions and presentation of the
related information of the appropriate persons. The basic features of accounting are as follows:
1. Accounting is a process
A process refers to the method of performing any specific job step by step according to the
objectives, or target. Accounting is identified as a process as it performs the specific task of
collecting, processing and communicating financial information. In doing so, it follows some
definite steps like collection of data recording, classification summarization, finalization and
reporting.
2. Accounting is an art
Accounting is an art of recording, classifying, summarizing and finalizing the financial data. The
word ‘art’ refers to the way of performing something. It is a behavioral knowledge involving
certain creativity and skill that may help us to attain some specific objectives. Accounting is a
systematic method consisting of definite techniques and its proper application requires applied
skill and expertise. So, by nature accounting is an art.
3. Accounting is means and not an end
Accounting finds out the financial results and position of an entity and the same time, it
communicates this information to its users. The users then take their own decisions on the basis of
such information. So, it can be said that mere keeping of accounts can be the primary objective of
any person or entity. On the other hand, the main objective may be identified as taking decisions
on the basis of financial information supplied by accounting. Thus, accounting itself is not an
objective, it helps attaining a specific objective. So it is said the accounting is ‘a means to an end’
and it is not ‘an end in itself.’
4. Accounting deals with financial information and transactions
Accounting records the financial transactions and date after classifying the same and finalizes their
result for a definite period for conveying them to their users. So, from starting to the end, at every
stage, accounting deals with financial information. Only financial information is its subject matter.
It does not deal with non-monetary information of non-financial aspect.
5. Accounting is an information system
Accounting is recognized and characterized as a storehouse of information. As a service function,
it collects processes and communicates financial information of any entity. This discipline of
knowledge has been evolved out to meet the need of financial information required by different
interested groups.

Accounting Concepts
There are a number of conceptual issues that one must understand in order to develop a firm
foundation of how accounting works. These basic accounting concepts are as follows:
• Accruals concept. Revenues are recognized when earned, and expenses are recognized
when assets are consumed. This concept means that a business may recognize sales, profits
and losses in amounts that vary from what would be recognized based on the cash received
from customers or when cash is paid to suppliers and employees. Auditors will only certify
the financial statements of a business that have been prepared under the accruals concept.
• Conservatism concept. Revenues are only recognized when there is a reasonable certainty
that they will be realized, whereas expenses are recognized sooner, when there is a
reasonable possibility that they will be incurred. This concept tends to result in more
conservative financial statements.

• Consistency concept. Once a business chooses to use a specific accounting method, it

should continue using it on a go-forward basis. By doing so, the financial statements
prepared in multiple periods can be reliably compared.
• Economic entity concept. The transactions of a business are to be kept separate from those
of its owners. By doing so, there is no intermingling of personal and business transactions
in a company’s financial statements.
 • Going concern concept. Financial statements are prepared on the assumption that the
business will remain in operation in future periods. Under this assumption, revenue and
expense recognition may be deferred to a future period, when the company is still
operating. Otherwise, all expense recognition in particular would be accelerated into the
current period.
• Matching concept. The expenses related to revenue should be recognized in the same
period in which the revenue was recognized. By doing this, there is no deferral of expense
recognition into later reporting periods, so that someone viewing a company’s financial
statements can be assured that all aspects of a transaction have been recorded at the same
time.

• Materiality concept. Transactions should be recorded when not doing so might alter the
decisions made by a reader of a company’s financial statements. This tends to result in
relatively small-size transactions being recorded, so that the financial statements
comprehensively represent the financial results, financial position, and cash flows of a
business.

Accounting Principles, conventions & Concepts

A number of basic accounting principles have been developed through common usage. They form
the basis upon which the complete suite of accounting standards have been built. The best-known
of these principles are as follows:
Accrual principle: This is the concept that accounting transactions should be recorded in the
accounting periods when they actually occur, rather than in the periods when there are cash flows
associated with them. This is the foundation of the accrual basis of accounting. It is important for
the construction of financial statements that show what actually happened in an accounting period,
rather than being artificially delayed or accelerated by the associated cash flows. For example, if
you ignored the accrual principle, you would record an expense only when you paid for it, which
might incorporate a lengthy delay caused by the payment terms for the associated supplier invoice.
Conservatism principle: This is the concept that you should record expenses and liabilities as
soon as possible, but to record revenues and assets only when you are sure that they will occur.
This introduces a conservative slant to the financial statements that may yield lower reported
profits, since revenue and asset recognition may be delayed for some time. Conversely, this
principle tends to encourage the recordation of losses earlier, rather than later. This concept can be
taken too far, where a business persistently misstates its results to be worse than is realistically the
case.
Consistency principle: This is the concept that, once you adopt an accounting principle or
method, you should continue to use it until a demonstrably better principle or method comes along.
Not following the consistency principle means that a business could continually jump between
different accounting treatments of its transactions that makes its long-term financial results
extremely difficult to discern.
Cost principle: This is the concept that a business should only record its assets, liabilities, and
equity investments at their original purchase costs. This principle is becoming less valid, as a host
of accounting standards are heading in the direction of adjusting assets and liabilities to their fair
values.
Economic entity principle: This is the concept that the transactions of a business should be kept
separate from those of its owners and other businesses. This prevents intermingling of assets and
liabilities among multiple entities, which can cause considerable difficulties when the financial
statements of a fledgling business are first audited.
Full disclosure principle: This is the concept that you should include in or alongside the financial
statements of a business all of the information that may impact a reader’s understanding of those
statements. The accounting standards have greatly amplified upon this concept in specifying an
enormous number of informational disclosures.
Going concern principle: This is the concept that a business will remain in operation for the
foreseeable future. This means that you would be justified in deferring the recognition of some
expenses, such as depreciation, until later periods. Otherwise, you would have to recognize all
expenses at once and not defer any of them.
Matching principle: This is the concept that, when you record revenue, you should record all
related expenses at the same time. Thus, you charge inventory to the cost of goods sold at the same
time that you record revenue from the sale of those inventory items. This is a cornerstone of the
accrual basis of accounting. The cash basis of accounting does not use the matching the principle.
Materiality principle: This is the concept that you should record a transaction in the accounting
records if not doing so might have altered the decision making process of someone reading the
company’s financial statements. This is quite a vague concept that is difficult to quantify, which
has led some of the more picayune controllers to record even the smallest transactions.
Monetary unit principle: This is the concept that a business should only record transactions that
can be stated in terms of a unit of currency. Thus, it is easy enough to record the purchase of a
fixed asset, since it was bought for a specific price, whereas the value of the quality control system
of a business is not recorded. This concept keeps a business from engaging in an excessive level
of estimation in deriving the value of its assets and liabilities.
Reliability principle: This is the concept that only those transactions that can be proven should
be recorded. For example, a supplier invoice is solid evidence that an expense has been recorded.
This concept is of prime interest to auditors, who are constantly in search of the evidence
supporting transactions.
Revenue recognition principle: This is the concept that you should only recognize revenue when
the business has substantially completed the earnings process. So many people have skirted around
the fringes of this concept to commit reporting fraud that a variety of standard-setting bodies have
developed a massive amount of information about what constitutes proper revenue recognition.
Time period principle: This is the concept that a business should report the results of its
operations over a standard period of time. This may qualify as the most glaringly obvious of all
accounting principles, but is intended to create a standard set of comparable periods, which is
useful for trend analysis.
These principles are incorporated into a number of accounting frameworks, from which accounting
standards govern the treatment and reporting of business transactions.

Accounting Concepts
1. Business entity concept: A business and its owner should be treated separately as far as
their financial transactions are concerned.
2. Money measurement concept: Only business transactions that can be expressed in terms
of money are recorded in accounting, though records of other types of transactions may be
kept separately.
3. Dual aspect concept: For every credit, a corresponding debit is made. The recording of a
transaction is complete only with this dual aspect.
4. Going concern concept: In accounting, a business is expected to continue for a fairly long
time and carry out its commitments and obligations. This assumes that the business will
not be forced to stop functioning and liquidate its assets at “fire-sale” prices.
5. Cost concept: The fixed assets of a business are recorded on the basis of their original cost
in the first year of accounting. Subsequently, these assets are recorded minus depreciation.
No rise or fall in market price is taken into account. The concept applies only to fixed
assets.
6. Accounting year concept: Each business chooses a specific time period to complete a
cycle of the accounting process—for example, monthly, quarterly, or annually—as per a
fiscal or a calendar year.
7. Matching concept: This principle dictates that for every entry of revenue recorded in a
given accounting period, an equal expense entry has to be recorded for correctly calculating
profit or loss in a given period.
8. Realisation concept: According to this concept, profit is recognised only when it is earned.
An advance or fee paid is not considered a profit until the goods or services have been
delivered to the buyer.

Accounting Equation
The accounting equation is a basic principle of accounting and a fundamental element of the
balance sheet. The equation is as follows:
Total Assets = Current Assets + Non-Current Assets
Total Liabilities = Current Liabilities + Non-Current Liabilities
 Total Shareholders’ Equity = Share Capital + Retained Earning
Assets = Liabilities + Shareholder’s Equity
This equation sets the foundation of double-entry accounting and highlights the structure of the
balance sheet. Double-entry accounting is a system where every transaction affects both sides of
the accounting equation. For every change to an asset account, there must be an equal change to a
related liability or shareholder’s equity account. It is important to keep the accounting equation in
mind when performing journal entries.
The balance sheet is broken down into three major sections and its various underlying items:
Assets, Liabilities, and Shareholder’s Equity.
Below are some examples of items that fall under each section:
• Assets: Cash, Accounts Receivable, Inventory, Equipment
• Liabilities: Accounts Payable, Short-term borrowings, Long-term Debt
• Shareholder’s Equity: Share Capital, Retained Earnings
The accounting equation shows the relationship between these items.
Rearranging the Accounting Equation
The accounting equation can also be rearranged into the following form:
Shareholder’s Equity = Assets – Liabilities
In this form, it is easier to highlight the relationship between shareholder’s equity and debt
(liabilities). As you can see, shareholder’s equity is the remainder after liabilities has been
subtracted from assets. This is because creditors – parties that lend money – have the first claim to
a company’s assets.
For example, if a company becomes bankrupt, its assets are sold and these funds are used to settle
debts first. Only after debts are settled are shareholders entitled to any of the company’s assets to
attempt to recover their investments.

International Accounting Principles and Standards

International Accounting Standards (IAS) are older accounting standards that were replaced in
2001 by International Financial Reporting Standards (IFRS), issued by the International
Accounting Standards Board (IASB), an independent international standard-setting body based in
London.
Understanding International Accounting Standards (IAS)
International Accounting Standards (IAS) were the first international accounting standards that
were issued by the International Accounting Standards Committee (IASC), formed in 1973. The
goal then, as it remains today, was to make it easier to compare businesses around the world,
increase transparency and trust in financial reporting, and foster global trade and investment.
Globally comparable accounting standards promote transparency, accountability, and efficiency
in financial markets around the world. This enables investors and other market participants to make
informed economic decisions about investment opportunities and risks, and improves capital
allocation. Universal standards also significantly reduce reporting and regulatory costs, especially
for companies with international operations and subsidiaries in multiple countries.
• International Accounting Standards were replaced in 2001 by International Financial
Reporting Standards (IFRS)
• Currently, the U.S., Japan, and China are the only major capital markets without an IFRS
mandate
• The U.S. accounting standards body has been collaborating with the Financial Accounting
Standards Board since 2002 to improve and converge American accounting principles
(GAAP) and IFRS

Moving Toward New Global Accounting Standards

There has been significant progress towards developing a single set of high-quality global
accounting standards since the IASC was replaced by the IASB. IFRS have been adopted by the
European Union, leaving the U.S., Japan (where voluntary adoption is allowed), and China (which
says it is working towards IFRS) as the only major capital markets without an IFRS mandate. As
of 2018, 144 jurisdictions require the use of IFRS for all or most publicly listed companies and a
further 12 jurisdictions permit its use.
Globally comparable accounting standards promote transparency, accountability, and efficiency
in financial markets around the world.
The U.S. is exploring adopting international accounting standards. Since 2002, America’s
accounting-standards body, the Financial Accounting Standards Board (FASB) and the IASB have
been collaborating on a project to improve and converge U.S. generally accepted accounting
principles (GAAP) and IFRS. However, while the FASB and IASB have issued norms together,
the convergence process is taking much longer than was expected—in part because of the
complexity of implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The Securities and Exchange Commission (SEC), which regulates U.S. securities markets, has
long supported high-quality global accounting standards in principle and continues to do so. In the
meantime, because U.S. investors and companies routinely invest trillions of dollars abroad, fully
understanding the similarities and differences between U.S. GAAP and IFRS is crucial. One
conceptual difference: IFRS is thought to be a more principles-based accounting system, while
GAAP is more rules-based.

Matching of Indian Accounting Standards with International Accounting Standards

The London based group namely the International Accounting Standards Committee (IASC),
responsible for developing International Accounting Standards, was established in June, 1973.
It is presently known as International Accounting Standards Board (IASB), The IASC comprises
the professional accountancy bodies of over 75 countries (including the Institute of Chartered
Accountants of India). Primarily, the IASC was established, in the public interest, to formulate and
publish, International Accounting Standards to be followed in the presentation of financial
statements. International Accounting Standards were issued to promote acceptance and observance
of International Accounting Standards worldwide. The members of IASC have undertaken a
responsibility to support the standards promulgated by IASC and to propagate those standards in
their respective countries.
Between 1973 and 2001, the International Accounting Standards Committee (IASC) released
International Accounting Standards.
Between 1997 and 1999, the IASC restructured their organisation, which resulted in formation of
International Accounting Standards Board (IASB). These changes came into effect on 1st April,
2001. Subsequently, IASB issued statements about current and future standards; IASB publishes
its Standards in a series of pronouncements called International Financial Reporting Standards
(IFRS). However, IASB has not rejected the standards issued by the ISAC. Those pronouncements
continue to be designated as “International Accounting Standards” (IAS).
INTERNATIONAL FINANCIAL REPORTING STANDARDS AS GLOBAL
STANDARDS
The term International Financial Reporting Standards (IFRS) comprises IFRS issued by IASB;
IAS issued by International Accounting Standards Committee (IASC); Interpretations issued by
the Standard Interpretations Committee (SIC) and the IFRS Interpretations Committee of the
IASB. International Financial Reporting Standards (IFRSs) are considered a “principles based” set
of standards. In fact, they establish broad rules rather than dictating specific treatments. Every
major nation is moving toward adopting them to some extent.
WHAT ARE INDIAN ACCOUNTING STANDARDS (IND AS)?
In India, the Institute of Chartered Accountants of India (ICAI) has worked towards convergence
by considering the application of IFRS in Indian corporate environment of Indian Accounting
Standards with Global Standards. Recognising the growing need of full convergence of Indian
Accounting Standards with IFRS, ICAI constituted a Task Force to examine various issues
involved. Full convergence involves adoption of IFRS in the same form as that issued by the IASB.
While formulating the Accounting Standards, ICAI recognises the legal and other conditions
prevailing in India and makes deviations from the corresponding IFRS. For convergence of Indian
Accounting Standards with International Financial Reporting Standards (IFRS), the Accounting
Standard Board in consultation with the Ministry of Corporate Affairs (MCA)), has decided that
there will be two separate sets of Accounting Standards viz. (i) Indian Accounting Standards
converged with the IFRS – standards which are being converged by eliminating the differences of
the Indian Accounting Standards vis-à-vis IFRS (known as Ind AS) and (ii) Existing Notified
Accounting Standards.
Indian Accounting Standards (Ind AS) are IFRS converged standards issued by the Central
Government of India under the supervision and control of Accounting Standards Board
(ASB) of ICAI and in consultation with National Advisory Committee on Accounting
Standards (NACAS).
Ind AS are named and numbered in the same way as the corresponding International
Financial Reporting Standards (IFRS).
The most important differences between IFRS and Indian GAAP are mentioned:
• IFRS is a much broader accounting standard in terms of scope and application. IFRS has
been used by 110 countries already. Indian GAAP is quite narrow and is only applicable
for the Indian
• For IFRS, the companies may need to prepare consolidated financial statements if they
don’t fall under the exemption of IAS-27 (Para 10). As per Indian GAAP, a company
doesn’t need to prepare consolidated statements.
• As per IFRS, the companies need to disclose as a note that they’re complying with the
IFRS. But in the case of Indian GAAP, there’s no need to a statement disclosing that the
company is complying with Indian GAAP.
• Revenue is always considered as the fair value of consideration receivable or received in
the case of IFRS. As per Indian GAAP on the other hand, revenue is considered when the
companies charge for products/services and also the benefits companies receive by using
their resources.
• As per IFRS, if the company isn’t using the functional currency, then the assets and
liabilities of the company would be converted by the exchange rate. On the other hand,
Indian GAAP doesn’t require an exchange rate since it’s only applicable for Indian
companies.
• There are many differences between IFRS and Indian GAAP. Let’s have a look at the chief
differences between these two –
Basis for comparison
between IFRS vs Indian IFRS Indian GAAP
GAAP
The Indian version of
International Financial
Meaning of the abbreviation Generally Accepted
Reporting Standards
Accounting Principles
International Accounting Ministry of Corporate Affairs
Developed by
Standards Board (IASB) (MCA)
When a company is said to
A company that is complying
follow the Indian GAAP, it’s
with IFRS needs to disclose as
presumed that it’s complying
Disclosure a note that their financial
with it and showing a true &
statements comply with the
fair view of its financial
IFRS.
affairs.
Companies in 110+ countries
have adopted IFRS. More and Indian GAAP is only adopted
Adopted by
more countries are making the by Indian companies.
shift as well.
 IFRS 1 provides clear Indian GAAP doesn’t give
How to adopt it for the first
instruction on how to adopt any clear instruction on the
time?
IFRS for the first time. first time adoption.
When the financial statements
are not presented in the There’s no question of using
Usage of currency in the functional currency, then the exchange rate since Indian
presentation assets and liabilities of the GAAP is only used in the
balance sheet are transmuted Indian context.
by the exchange rate.
If the companies don’t come As per the Indian GAAP, the
under the exemption criteria companies should prepare
Consolidated Financial mentioned under IAS 27 (Para individual financial
Statements 10), the companies need to statements. There’s no
prepare consolidated financial requirement of preparing
statements. consolidated statements.
The companies following
Indian companies following
IFRS needs to prepare the
Indian GAAP needs to prepare
What financial statements balance sheet (statement of
the balance sheet, profit & loss
need to be prepared? financial position) and the
account, and cash flow
income statement (statement
statement.
of comprehensive income).
The money charged for the
products/services to the
As per IFRS, the revenue is
customers and the rewards
How is revenue shown? shown at the fair value of the
received by using the
money received or receivable.
resources come under revenue
as per Indian GAAP.