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CA Intermediate · Advanced Accounting · Introduction to Accounting Standards

Kaveri Textiles Ltd. is a company whose equity shares are listed on a recognised stock exchange in India. Its management wants to know why the company must follow the Accounting Standards notified under the Companies Act, 2013 while preparing its financial statements. Which statement correctly describes the position?

The notified Accounting Standards are mandatory for companies, and their financial statements must comply with them to show a true and fair view. They are not optional guidelines, and a departure cannot be justified merely by disclosing it. Applicability does not depend on a turnover figure of Rs 1,000 crore.

  1. AAccounting Standards are mere guidelines and a listed company may depart from them without any disclosure
  2. BAccounting Standards notified under the Companies Act are mandatory, and the financial statements must comply with themCorrect
  3. CAccounting Standards apply only to companies whose turnover exceeds Rs 1,000 crore
  4. DAccounting Standards are mandatory only for the cash flow statement and optional for other areas

Explanation

Under the Companies Act, 2013, financial statements must give a true and fair view and comply with the notified Accounting Standards. So compliance is mandatory for companies. The option calling them mere guidelines is wrong because departures are not permitted merely by disclosing them.

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