Hello Everyone, Accounting Standards, Chapter No.
Friends, what is this, why is this, how is this and what is
the role of accounting standards?
I will try to tell you through an example
There are two shopkeepers, A and B
Both have the same shop in the same market
A bought 1000 T-Shirts, he sold 900 T-Shirts and 100
T-Shirts are left in his warehouse
B also bought 1000 T-Shirts, he also sold 900 T-Shirts and
100 T-Shirts are left in his warehouse
And today is 31st March 31st March is the date when the
accounts are closed 31st March is the date when the balance
sheet is made on the day of trading
And in the trading account, you have to write an item on
the credit side and the balance sheet on the asset side
Which is called Closing Stock
Now how much stock is left?
A has 100 T-Shirts, B also has 100 T-Shirts
But we do not write in quantity
The closing stock written in the trading and balance sheet
is not written in quantity
It is written in value, it is written in rupees
How did you get it in rupees?
A said there are 100 T-Shirts
And I bought every T-Shirt for 100 Rupees
So 100 into 100 is a stock of 10,000 Rupees
He wrote 10,000 Rupees in his trading and balance sheet
Multiplying 100 T-Shirts by 100
B said I also bought 100 T-Shirts for 100 Rupees
But I will not write 10,000 Rupees
People asked him why you will not write 10,000 Rupees
If you bought 100 T-Shirts for 100 Rupees, then 100 into
100 is 10,000 Rupees
According to 100 Rupees each
Why don't you write 10,000 Rupees
He is saying that I bought it for 100 Rupees
But I will sell them for 150 Rupees
Every T-Shirt
I will sell as much as I bought
The 100 T-Shirts that I have today
Customers will come to me
I will sell them for 150 Rupees
So 100 into 150 is 15,000 Rupees
These T-Shirts are worth 15,000 Rupees
If she will give me 15,000 Rupees
Then these T-Shirts are worth 15,000 Rupees for me
So I will write 15,000 Rupees in my trading and balance
sheet
For me, their value is 15,000 Rupees
People said you are right 10,000 Rupees is also right
Because he bought it for 10,000 Rupees 15,000 Rupees is
also right
So their value is 15,000 Rupees
Now the fight starts
Friends, Closing Stock and Profit
Have a direct relation
You can't say that if A wants 10,000 Rupees
Then record A at 10,000 Rupees
If B wants 15,000 Rupees, then record B at 15,000 Rupees
This spoils the meaning of accounting
People will do whatever they want
Closing Stock and Profit have a very deep relation
Like twin brothers
If one increases, the other also increases
If one decreases, the other also decreases
That means my dear friends
If you show 100 T-Shirts for 100 Rupees
Then A's Profit will be less
And if you show 100 T-Shirts for 150 Rupees
Closing Stock for 15,000 Rupees
Then B's Profit will be more
Even though both have equal sales
So Profit of both should be same
This will make people think that B is doing a good job
This will make A understated
That's why there should be some uniform rule
In such a case
Institute of Chartered Accountants of India
In Bharat Varsh
ICAI organization comes in the middle
And under ICAI
There is a board
ASB Accounting Standard Board
The objective of ASB Accounting Standard Board
Is to remove the shortcomings in the accounts
Remove the disputes
And work for the betterment of the accounts
For this, they come with some principles
Where there is a need
And those principles are called accounting standards
Which everyone has to accept
Which are applicable to everyone
There can be some exceptions
We will not talk about them
But it is mandatory for everyone to follow
It is the benefit of the organization itself
To follow the accounting standards
Now This news has reached the ASB
There is a dispute over closing stock
Someone is writing on 10
Someone is writing on 15
So ASB made a rule
They said
One person is saying
I will record 100 T-shirts at 10,000
According to the cost price of 100 Rupees
And the other person is saying
I will record 100 T-shirts at 15,000
They made a rule
Cost and market price
Whichever is lower
Take lower
And record on the smaller figure 100 is the cost price, 150
is the market price
So the lower figure is 100
So A was told
Yes, you are recording at 100
B, you also come down from 150 and record at 100
Come down from 150 and record at 100
Sir, why was this said?
B was told
Why are you estimating the future?
The T-shirt is not sold
It will be sold in the future
How did you write 15,000 on the stock today?
If you write 15,000 instead of 10
And increase it from 5,000
You recorded the profit today
Without selling the T-shirt
You are recording the profit
What is the meaning of writing on the sale price?
Profit is also included in the sale price
Did you record the profit?
If you are multiplying the sale price
And writing the value of the closing stock
The T-shirt that has not yet been sold
If you write the event in the future
It is wrong
You cannot record the expected income
According to prudence
Then B said
I recorded the future income today
It is my mistake, I will improve it
I will bring it to the cost price
He also started recording at 10,000
Sir, what happens
If the market price comes below the cost price
Market price can come below the cost price
Yes The demand for that product has decreased
The product has become outdated
No one is willing to buy
It is selling with great difficulty
No customer, no demand
That's why you have to sell below the cost
Suppose if the cost price is 100 rupees
And if the market price comes at 80
If it goes below the cost
Then we will write 100 T-shirts at 188,000
A and B both
Why sir?
Because prudence says
You can record the expected losses
Market price whichever is lower
If the cost is 100 and the market price is below 80
Then we will record at the market price
Because the rule says to take the lower one
And this rule is made on the basis of prudence
If the market price is high
Then prudence says no, record at the cost
Because you cannot record the expected income
If the market price is low
Then at the cost
If the market price is low at the cost
Then take the market price
Because prudence says you can record the expected losses
If you think that the thing of 100 will sell at 80
If you think that the thing of 20 will sell at 80
Then take the market price at 80
If you think that the thing of 100 will sell at 80
Then take the market price at 80
Because prudence says you can record the expected losses
Sir, why prudence says this?
That record the expected losses
But do not record the expected income
Prudence says this
Because
Prudence says
In worst possible situation
Do accounting
If you think that the thing of 100 will sell at 80
Then what situation you are in?
If you think that the thing of good will not sell
If you think that the thing of bad will sell
Then will you be able to survive in business or not?
Assume yourself in such situations
And do accounting
This is prudence says
This is a safer way of accounting
If you remove your luck
If you consider your luck as bad
And still you are able to survive
Then you are doing great
Now you can only progress
Now you have to say
Never consider yourself as number one
Because number one can be brought down
The one who considers himself as last
No one can bring him down
The one who considers himself as last
No one can bring him down
Now you will say
Sir, this is demotivation
Because you have a habit of listening opposite things
You have a habit of listening opposite speakers
They fill energy in you
After 5 minutes you come back
Accept the truth
What does it mean to say down?
What does it mean to consider yourself as last?
Be humble, stay on the earth, don't fly
And you will see
If you consider yourself as last in your mind
Then you will become number one in the eyes of the world
And still you have to be last in your mind
So that if tomorrow comes bad time
Then you stay there
No harm will fall on your mind
You don't have to face any misery
This is the way of living
Okay Then what happened
Inventories were named
Accounting Standard Board made a rule
Made a draft
And AS2
Accounting Standard 2
It was issued in the name of Valuation of Inventories
Friends, in the same way
Wherever there are disputes in the accounts
If there is a need
If there is a falsification
To improve all
Accounting Standards come to us
AS also drafts them
Then gives it to ICA
Then ICA passes them
Many Accounting Standards
Passed by MCA
Ministry of Corporate Affairs
Now friends what happened
You have learned the accounting of one country
You have read the accounting standards of India
But you want to become global
So you have to read the accounting standards of America
You have to read the accounting standards of UK
You have to read the accounting standards of Japan
That's why all countries decided
Why not make such standards
After reading them
So that you can do accounting anywhere in the world
Understand the accounting of the whole world
Understand the accounting standards of the whole world
Because Capital Investment
The world wants to take it overseas
They want people to invest in other countries
In other countries' companies
That's why
So for this
IFRS was drafted
International Financial Reporting Standards
All countries
International Financial Reporting Standards
All countries
Commonly applicable
After reading them
You can do accounting anywhere in the world
Now see
There is a person in India
He wants to invest in a company in the UK
He wants to judge the UK company
Whether it is worth investing or not It is based on
financial statements.
If you read their financial statements, you will understand
what they are based on.
Because their financial statements are based on the
country's accounting standards.
That is why it is important to have common accounting
standards.
So that you can read any country's financial statements.
You can read any country's company's balance sheet, trading
P&L.
And it will help you to take a decision whether you want to
invest in this company or not.
That is why the IFRS was made.
And in all the countries, the IFRS was implemented.
When the IFRS was adopted in India, it was named IND-AS.
Indian Accounting Standards.
IND-AS.
In short form.
And now, IND-AS is not applicable on the land level.
It has reached the average level.
It is applicable in many companies.
A lot of companies are yet to come.
So now, both accounting standards and IND-AS are running in
parallel.
Okay? Some have AS and some have IND-AS.
But in the future, all the accounting standards will be
removed.
We will have IND-AS only.
Indian Accounting Standards.
Okay.
So, whatever I have said, the theory with you here,
It is all written in the chapter of Accounting Standards.
You can read it out.
And you will understand the accounting standards completely.
Although you do not need to read anything.
The course is practical.
I am saying it again and again.
What is important for you?
What I said.
It is our duty to give notes.
That's why we are giving you notes.
Listening and understanding was what I said to you 10-12
minutes ago.
The entire chapter is in that.
Okay.
See you in the next clip with the next chapter.
Thank you.
Bye-bye.
Take care.