Understanding Accounting Rules In India
Accounting is the systematic process of measuring, communicating, analysing and interpreting financial information for decision making. There are different accounting rules, regulations and accounting bodies in different countries across the world, although they are regulated by the Generally Accepted Accounting Principles (GAAP).
In this article, we are going to focus on accounting in India and will lay emphasis on the following;
- Tax year
- Accounting standards
- Regulation bodies
- Accounting reports
- Publication requirement
ACCOUNTING RULES
TAX YEAR
The fiscal year in India begins on 1 April and ends on the 31 March of the following year. Example: A new fiscal year begins on 1st April, 2010 and ends on the 31st March, 2011.
ACCOUNTING STANDARDS
Accounting standards issued by the Institute of Chartered Accountants of India (ICAI), which largely are based substantially and converged with IFRS standards. Financial statements must be prepared annually, in accordance with the accounting standards prescribed under the Companies Act. These accounting standards and IFRS are not the same.
India has adopted the accounting standards of IFRS (subject to a few carve-outs); these standards are called the Indian Accounting Standards or the Ind AS. For accounting periods beginning on or after 1st April 2016, these standards are compulsory for listed and unlisted companies meeting certain net worth thresholds.
ACCOUNTING REGULATION BODIES
The Institute of Chartered Accountants of India is saddled with the responsibilities of regulating accounting in India.
ACCOUNTING REPORTS
'Balance Sheet' and 'Profit & Loss' report. Companies in India are required to prepare their financial statements at the end of every year, in accordance with the provisions of the Companies Act, and they will have to be independently audited by a practicing chartered accountant or a chartered accounting firm which is registered with the ICAI. The audited financial statements must be approved by the members in an annual general meeting. All companies are required to file their audited financial statements with the ROC after they have been approved by the members.
PUBLICATION REQUIREMENTS
The "balance sheet" and ‘profit and loss account' of business in India need to be published every fiscal year.
PROFESSIONAL ACCOUNTANCY BODIES
Institute of Chartered Accountants of India (ICAI)
CERTIFICATION AND AUDITING
Companies have to outsource an external auditor to conduct an annual audit of the financial statement of their organization. For more information, consult the Institute of Internal Auditors-India and The Institute of Chartered Accountants of India (ICAI).
