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AFM Capsule Cards FREE Definition, Scope & A…
What is the most widely accepted definition of Accounting given by the American Institute of Certified Public Accountants (AICPA)?
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It is the art of recording, classifying and summarising in a significant manner and in terms of money, transactions of a financial character.
Continuation:
Accountancy is a wider concept that includes bookkeeping. Bookkeeping is just recording in books of original entry and ledgers.
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Definition of Accounting (AICPA)
Definition, Scope & Accounting Standards including Ind AS 86
WA 86
AFM Capsule Cards FREE Definition, Scope & A…
What is the fundamental difference in the regulatory approach between US GAAP and IFRS?
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US GAAP is considered a rules-based system of accounting, whereas IFRS is designed as a more principles-based system.
Continuation:
IFRS allows the revaluation model for fixed assets, whereas US GAAP strictly uses the historical cost model less accumulated depreciation.
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US GAAP vs IFRS (Rules vs Principles)
Definition, Scope & Accounting Standards including Ind AS 82
WA 82
AFM Capsule Cards FREE Definition, Scope & A…
In India, which body was constituted to harmonise diverse accounting policies and practices, and in which year was it established?
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The Institute of Chartered Accountants of India (ICAI) constituted the Accounting Standards Board (ASB) on 21st April, 1977.
Continuation:
The main function of ASB is to formulate accounting standards so that the council of ICAI may mandate them.
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Accounting Standards Board (ASB)
Definition, Scope & Accounting Standards including Ind AS 67
WA 67
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What are the legal implications under the Companies Act 2013 if a company's financial statements do not comply with mandatory Accounting Standards?
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Section 129(5) requires disclosure of the deviation, reasons, and financial effects. Section 134(5) casts responsibility on the Board of Directors.
Continuation:
Auditors must qualify their reports if mandatory standards are not followed, failing which they are guilty of professional misconduct.
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Mandatory AS Compliance & Law
Definition, Scope & Accounting Standards including Ind AS 58
WA 58
AFM Capsule Cards FREE Definition, Scope & A…
What does Accounting Standard 1 (AS 1) mandate regarding the preparation of financial statements and fundamental accounting assumptions?
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It requires disclosure of all significant accounting policies. If Going Concern, Consistency, and Accrual are followed, specific disclosure is not needed.
Continuation:
If any fundamental assumption is NOT followed, it must be explicitly disclosed to facilitate a meaningful comparison between enterprises.
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AS 1: Disclosure of Accounting Policies
Definition, Scope & Accounting Standards including Ind AS 54
WA 54
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AFM Capsule Cards FREE Definition, Scope & A…
According to AS 2, how should inventories be valued in the financial statements, and which cost formulas are permitted?
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Inventories must be valued at the lower of cost or net realisable value. FIFO and Weighted Average Cost methods are permitted.
Continuation:
AS 2 does not apply to work in progress under construction contracts, service providers, or shares/debentures held as stock-in-trade.
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AS 2: Valuation of Inventories
Definition, Scope & Accounting Standards including Ind AS 48
WA 48
AFM Capsule Cards FREE Definition, Scope & A…
Under AS 16, what is the accounting treatment for borrowing costs directly attributable to the acquisition or construction of a qualifying asset?
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Such borrowing costs should be capitalised as part of the cost of the asset. Other borrowing costs are recognized as an expense.
Continuation:
A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale.
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AS 16: Borrowing Costs
Definition, Scope & Accounting Standards including Ind AS 44
WA 44
AFM Capsule Cards FREE Definition, Scope & A…
How does AS 3 classify cash flows, and what qualifies as a cash equivalent?
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Cash flows are classified into Operating, Investing, and Financing activities. Cash equivalents are short-term, highly liquid investments.
Continuation:
Cash flow statements can be prepared using either the Direct or Indirect method. Cash includes cash in hand and demand deposits with banks.
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AS 3: Cash Flow Statements
Definition, Scope & Accounting Standards including Ind AS 43
WA 43
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What does IFRS stand for, and what is its primary purpose in global accounting?
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International Financial Reporting Standards. They serve as a common global language for business affairs, making accounts comparable across borders.
Continuation:
IFRS replaced the older International Accounting Standards (IAS). The IASB (International Accounting Standards Board) is the independent body that sets IFRS.
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Overview of IFRS
Definition, Scope & Accounting Standards including Ind AS 40
WA 40
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How are Ind AS related to IFRS, and what makes them different from exact IFRS guidelines?
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Ind AS are the converged form of IFRS in India. They contain certain additions and deletions (carve-outs) to suit the Indian economic/legal environment.
Continuation:
The MCA notifies Ind AS based on ICAI's recommendation to the NFRA. Scheduled commercial banks must apply Ind AS per RBI guidelines.
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Indian Accounting Standards (Ind AS)
Definition, Scope & Accounting Standards including Ind AS 40
WA 40
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AFM Capsule Cards FREE Definition, Scope & A…
In the context of Transfer Pricing, what is the Arm's Length Price and why is it important for tax laws?
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It is the price at which two unrelated and non-desperate parties would agree to a transaction.
Continuation:
It prevents multinational groups from arbitrarily shifting profits to low-tax countries. Methods include Comparable Uncontrolled Price, Cost Plus, etc.
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Arm's Length Price
Definition, Scope & Accounting Standards including Ind AS 36
WA 36
AFM Capsule Cards FREE Definition, Scope & A…
Financial statements often fail to reflect the true picture due to the assumption of a stable monetary unit. Which type of accounting addresses this?
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Inflation Accounting. It adjusts the value of assets (current and fixed) and profits in light of changes in the price level.
Continuation:
It aims at correcting the distortions in reported results caused by rising prices, which otherwise tend to overstate profit.
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Inflation Accounting Concept
Definition, Scope & Accounting Standards including Ind AS 36
WA 36
AFM Capsule Cards FREE Definition, Scope & A…
Which Accounting Standard covers the effects of changes in foreign exchange rates and how are foreign currency transactions recorded initially?
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AS 11. Transactions are recorded in the reporting currency using the exchange rate at the date of the transaction.
Continuation:
It does not deal with restatement of an enterprise's financial statements from its reporting currency into another currency for user convenience.
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AS 11: Foreign Exchange Rates
Definition, Scope & Accounting Standards including Ind AS 28
WA 28
AFM Capsule Cards FREE Definition, Scope & A…
What is the primary objective of AS 19, and how does it generally classify leases based on risks and rewards?
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AS 19 prescribes accounting policies for lessors and lessees. Leases are classified as Finance or Operating based on the transfer of risks and rewards.
Continuation:
AS 19 applies equally to sale and leaseback transactions. A finance lease transfers substantially all the risks and rewards incident to ownership.
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AS 19: Leases (Finance vs Operating)
Definition, Scope & Accounting Standards including Ind AS 28
WA 28
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What does Transfer Pricing refer to in a multidivisional organisation or multinational company?
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It refers to the pricing of goods and services for cross-border transactions between different divisions of the same multi-entity company.
Continuation:
It is used to evaluate branch/division performance and manage tax liabilities. Governments regulate it to stem the flow of taxation revenue overseas.
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Transfer Pricing Concept
Definition, Scope & Accounting Standards including Ind AS 28
WA 28
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AFM Capsule Cards FREE Definition, Scope & A…
What do Accounting Standard 9 and Accounting Standard 10 deal with in financial reporting?
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AS 9 deals with Revenue Recognition. AS 10 prescribes the accounting treatment for Property, Plant and Equipment (PPE).
Continuation:
Under AS 10, an item of PPE is recognized only if future economic benefits will flow to the enterprise and the cost can be reliably measured.
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AS 9 Revenue & AS 10 PPE
Definition, Scope & Accounting Standards including Ind AS 27
WA 27
AFM Capsule Cards FREE Definition, Scope & A…
What are the primary objectives of AS 12 and AS 13 in Indian Accounting Standards?
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AS 12 deals with accounting for Government Grants (subsidies/incentives). AS 13 deals with accounting for Investments (long-term vs current).
Continuation:
AS 13 classifies investments into current and long-term. AS 12 requires unconditional biological asset grants to be recognized in profit/loss.
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AS 12 Govt Grants & AS 13 Investments
Definition, Scope & Accounting Standards including Ind AS 26
WA 26
AFM Capsule Cards FREE Definition, Scope & A…
Name two non-traditional methods available for determining the arm's length price in transfer pricing.
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The Profit Split (PS) method and the Transactional Net Margin Method (TNMM).
Continuation:
PS is used when businesses are highly integrated, splitting ultimate profit. TNMM examines net profit margin relative to an appropriate base.
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Non-Traditional TP Methods
Definition, Scope & Accounting Standards including Ind AS 26
WA 26
AFM Capsule Cards FREE Definition, Scope & A…
What is the difference between Value Accounting and Fair Value Accounting in modern financial reporting systems?
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Value Accounting captures individual contributions to a product. Fair Value Accounting focuses on the current market value of assets/liabilities.
Continuation:
Fair value approaches include Market, Income, and Cost approaches. It is not widely accepted yet due to cost, delays, and reliability issues.
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Value vs Fair Value Accounting
Definition, Scope & Accounting Standards including Ind AS 25
WA 25
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Definition, Scope & Accounting Standards including Ind AS — JAIIB AFM Capsules

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Definition of Accounting (AICPA) What is the most widely accepted definition of Accounting given by the American Institute of Certified P… US GAAP vs IFRS (Rules vs Principles) What is the fundamental difference in the regulatory approach between US GAAP and IFRS? Accounting Standards Board (ASB) In India, which body was constituted to harmonise diverse accounting policies and practices, and in whic… Mandatory AS Compliance & Law What are the legal implications under the Companies Act 2013 if a company's financial statements do not… AS 1: Disclosure of Accounting Policies What does Accounting Standard 1 (AS 1) mandate regarding the preparation of financial statements and fun… AS 2: Valuation of Inventories According to AS 2, how should inventories be valued in the financial statements, and which cost formulas… AS 16: Borrowing Costs Under AS 16, what is the accounting treatment for borrowing costs directly attributable to the acquisiti… AS 3: Cash Flow Statements How does AS 3 classify cash flows, and what qualifies as a cash equivalent? Overview of IFRS What does IFRS stand for, and what is its primary purpose in global accounting? Indian Accounting Standards (Ind AS) How are Ind AS related to IFRS, and what makes them different from exact IFRS guidelines? Arm's Length Price In the context of Transfer Pricing, what is the Arm's Length Price and why is it important for tax laws? Inflation Accounting Concept Financial statements often fail to reflect the true picture due to the assumption of a stable monetary u… AS 11: Foreign Exchange Rates Which Accounting Standard covers the effects of changes in foreign exchange rates and how are foreign cu… AS 19: Leases (Finance vs Operating) What is the primary objective of AS 19, and how does it generally classify leases based on risks and rew… Transfer Pricing Concept What does Transfer Pricing refer to in a multidivisional organisation or multinational company? AS 9 Revenue & AS 10 PPE What do Accounting Standard 9 and Accounting Standard 10 deal with in financial reporting? AS 12 Govt Grants & AS 13 Investments What are the primary objectives of AS 12 and AS 13 in Indian Accounting Standards? Non-Traditional TP Methods Name two non-traditional methods available for determining the arm's length price in transfer pricing. Value vs Fair Value Accounting What is the difference between Value Accounting and Fair Value Accounting in modern financial reporting…
Chapters in this paper
Definition, Scope & Accounting Standards including Ind AS Balance Sheet Equation Financial Management - An Overview Taxation: Income Tax/TDS/Deferred Tax Basic Accountancy Procedures Preparation of Final Accounts Ratio Analysis Goods & Services Tax Maintenance of Cash/Subsidiary Books and Ledger Company Accounts - I Financial Mathematics - Calculation of Interest and Annuities An Overview of Cost & Management Accounting Bank Reconciliation Statement Company Accounts - II Financial Mathematics - Calculation of YTM Costing Methods
Modules in AFM
MODULE A: Accounting Principles and Processes MODULE B: Financial Statements and Core Banking Systems MODULE C: Financial Management MODULE D: Taxation and Fundamentals of Costing
JAIIB papers
IE-IFS — Indian Economy & Indian Financial System PPB — Principles & Practices of Banking AFM — Accounting & Financial Management for Bankers RBWM — Retail Banking & Wealth Management
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