In the era of industries, every machine works on resources of earth and releasing it by product in the atmosphere which directly affect the environment or atmosphere. Every by product or pollution pollutant somehow, related to increase of carbon level in atmosphere. According to Kyoto protocol, the 141 nations sign the protocol and take pledge to control the pollution and also works towards lowering the temperature of earth, but this is industrialization era and any country cannot cut the profit or use of resources by sudden to control pollution. So, carbon credit is introduced. Carbon credit is defined as term a carbon credit is equal 1 ton of carbon released in the atmosphere. Certificates of carbon credit is announcing to the countries which are doing precaution and reducing the emission of carbon. Carbon Credit is the scheme of international industries to control the emission. Carbon credit is actually a parameter to control the emission by connecting it to money. India and china is developing countries and get maximum benefit of this carbon credit scheme. If any company is emit less than the standard parameter, and the difference between them called carbon credit and this carbon credit can be exchangeable between two companies. In last few years, the business of carbon credit reached to six billion dollar and 22-25% business is share of India. In carbon credit accounting, carbon emission reduction (CER) acts as intangible assets, these assets cannot be used in production or in form of materials. CER has net realizable value and non- monetary assets and used to generate future economic benefits. In cost of inventories of CER includes research costs, cost to develop alternative process to reduce emission, cost to prepare design and cost to register in UNFCCC Challenges of India in carbon credit accounting are improper policy for trading of carbon in the international market.

KEYWORDS: Carbon Credit, Kyoto Protocol, Accounting, CER.