The accounting standards are an important factor to any enterprise or sole trader. It creates a safer business market for traders to trade in by following the rules and regulations that standardizes and results to efficient transactions within the market environment (Berry, 1999).
2.0 Regulatory Framework:
When countries move towards the economic development they have to take under consideration some steps. These steps set the standards of there economic state. And this is when the government plays a major role in setting the standards and has to step in to take control and plan. The government makes decisions regarding the prices, subsides, incentive, and decisions regarding the consumption patterns of a certain country. Moreover, the government is responsible for the actions and the ethical norms of its nation which greatly can reflect on there economic state of a country (Elliott and Elliott, 2008).Many governments set a taxation regulation which is an important part of any country that can greatly have an influence on the base and the future of the industrial decay of a country. In regulatory framework as I mentioned earlier is the key factor in setting the standards of its country. Therefore, the government interferes in the local market what can also be known as the states intervention. The intervention of the government is a very important factor in any country because its tries to prevent poverty and problems that may tackle the local market and this creates a safer market that can prosper into the future. In addition, a good regulatory framework leads to a greater control system which is the main factor in any markets success. Therefore, the market will be powerful, economically aware and stable. (Rayman.2006)
3.0 Accounting Standards:
Accounting standards are written policies that are done by experts or the government. Or by anybody else covering the aspects of acknowledgment, measurement, Arrangement & disclosure of accounting operations in financial statement. Moreover, when it comes to the balance sheet and profit and loss account to make sense in order for its users to be able to understand it and depend on them there has to be an accurate way in dealing with the financial statements (Berry, 1999). That’s because without the financial statements it’s impossible to use or rely on the financial statements and have them to be used to compare them to companies’ performances. In addition, the financial standards are also important to sole traders or to the small enterprises because the accounting standards sets the rules and regulation that are associated to trade or conditions and laws related to loans (Elliott and Elliott, 2002-2003).
3.0.1 The advantages of accounting standards:
Accounting standards is a very important factor in setting the rules and regulation that create boundaries for the market and for businesses to follow. Therefore this can create a safer market with miner risks and higher rates of success. Moreover, one of the main objectives of accounting standards is that it makes the financial statements more reliable and in which business and traders can relay on and benefit from it since it provides valuable information (Gollath, 2008). Moreover, accounting standards creates uniformity and that’s by pursuing a written standard at the outlay of social norm diminishes the efficiency of financial reporting in both the government, private business level and keeping the security markets aware. In addition, along with globalization an International accounting standard broad was set up to meet the need and serve the international market. To make it more flexible for businesses all around the world to trade among each other with no obstacles related to the rules and regulations (Berry, 1999).
3.0.2 The disadvantages of accounting standards:
There are a few drawbacks that arise when it comes to accounting standards. Because of the many guidelines and rules that are mentioned when it comes to accounting standards sometimes if the information that is recorded has to be accurate any mistake may cause problems not only to the businesses but the market as a whole. Moreover, due to the diversity that accounting standards and since there a number of boards created around the world that set the rules and standards for businesses that limits the governors of each country to set there own regulations or change any of the rules since the boards have control over that factor. In addition, the arising concern that business have been facing when it comes to accounting standards (CBSmoneywatch, 2010). Is the fact that accounting standards has been more of a rule oriented system that is filled with certain details that can at times make it difficult to address the businesses? In addition this has made it longer and more compounds which can result into lack of efficiency in the enterprises transactions. Moreover, a lack of accurate guiding principle might produce inconsistencies in the function of standards crosswise organizations. For example, enterprises are obligated to identify both an expense and a liability for a contingent liability that is credible and estimable. Overall, theses are only minor drawbacks considering the fact that business and govern benefit more from accounting standards (Berry and Jarvis, 2006).
4.0 Conclusion:
In conclusion, accounting standards play a major rule in letting enterprises maintain strong and standardized transactions. That can leads to a uniformed and diverted strategy within the business environment. Regardless of its numerous boundaries accounting standards has quite a lot of advantages and it has currently been broadly acknowledged and accepted by enterprises across the globe. However, a constant attempt is required from the accounting bodies to build up a fail-safe method, which can efficiently take over the long-established past method that is used in financial statements. Never the less, accounting standards remains one of the most useful and consistent ways the companies tend to use in the transactions (Woods, and Sangster, A, 2008; Rayman 2006).
