Describe the need for Accounting Standards.

The stability of any economic system depends upon the confidence of the users on the fairness and reliability of the financial statements. Therefore need arose for setting up guidelines that are universally applicable and are religiously followed for preparation and presentation of financial statements.

It is the function of accounting standards to establish general sense of confidence by providing a framework within which creditable financial statements can be produced so that they are reliable, relevant, understandable and comparable.