With the development of the technological changes in the present global economy, accounting has a tendency to become more and more complex in all sectors of the economy. Due to this, every person, economic sector and international environments call for simplified procedures of the accounting system. The sound health of any corporate enterprise can be judged as well as assessed according to its financial position at any time of the year. Information that is conveyed through the various published accounts at the end of each accounting period has been accepted to be a more effective mode of providing information for improvement and progress of the accounting standard.

Section 211 of the Companies Act prescribes that every profit and loss account and balance sheet of the company shall comply with the Accounting Standards. Further, where profit and loss account and balance sheet of the company do not comply with the accounting standards, such companies shall disclose in their profit and balance sheet .

Accounting standards means the standards of accounting recommended by the International Chartered Accountants of India (ICAI) and as may be prescribed by the Central Government in consultation with the National Advisory Committee (NAC) on accounting standards. It is provided that the standards of accounting specified by the ICAI shall be deemed to be the accounting standards until specific accounting standards are prescribed by the Central Government. The Central Government may, on the application or with the consent of the Board of Directors of the company, by order, modify in relation to the company, any of the requirements of the Act as to the matters to be stated in the company's balance sheet or profit and loss account for the purpose of adopting them to the circumstances of the company.

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