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CA Foundation · Accounting · Theoretical Framework

Which statement best describes the main objective of issuing Accounting Standards?

The main objective of Accounting Standards is to harmonise the varied accounting policies and practices followed by enterprises, so that financial statements become comparable and reliable. They do not set prices, compute tax or equalise profits, which still differ by business performance.

  1. ATo harmonise diverse accounting policies and practices so that financial statements are comparable and reliableCorrect
  2. BTo fix the selling price of goods and services of an enterprise
  3. CTo compute the income tax payable by an enterprise
  4. DTo ensure every enterprise reports the same profit

Explanation

Standards aim to reduce variation in accounting policies and practices, improving comparability and reliability of financial statements. They do not fix prices, compute tax, or force identical profits, since profits depend on actual business performance.

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