‘The accounting concepts and accounting standards are generally referred to as the essence of financial accounting’. Comment
Financial accounting is concerned with the preparation of financial statements and provides financial information to various accounting users. This is done according to basic accounting concepts like business unit, money measurement, consistency, conservatism, etc. These concepts allow different options to be treated the same transaction. For example, there are several methods available for computing stock and depreciation, which can be followed by different firms. This leads to misinterpretation of financial results by external users due to the problem of inconsistency and inconsistency of financial results between different business entities. In order to reduce inconsistencies and incomparability and to bring uniformity in preparation of financial statements, Accounting Standards are being issued by the Institute of Chartered Accountants of India in India. Accounting standards help in removing ambiguities and discrepancies. Therefore, accounting standards and accounting concepts are referred to as the essence of financial accounting.
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