Question

'The accounting concepts and accounting standards are generally referred to as the essence of financial accounting'. Comment.

Answer 1

The basic accounting concepts are referred to as the fundamental idea or basic assumptions underlying the theory and practice of financial accounting and are broad working rules for all accounting activities and developed by the accounting profession.
On the other hand, accounting standards are written statements of uniform accounting rules and guidelines or practices for preparing the uniform and consistent financial statements and for other disclosure affecting the user of accounting information. However, it is to be remembered that the customs, usages and business environment in the country.
Financial accounting is concerned with the preparation of financial statements and provides financial information to various accounting users. It is performed according to the basic accounting concepts like Business Entity, Money Measurement, Consistency, Conservatism etc.
These concepts allow various alternatives to treat the same transaction. This leads to wrong interpretation of financial results by external users due to the problem of inconsistency and incomparability of financial results among different business entities. In order to remove inconsistency and incomparability and to bring uniformity in preparation of the financial statements, accounting standards are being issued in India by the Institute of Chartered Accountant of India. Hence, accounting standards and accounting concepts are referred as the essence of financial accounting.