Accounting conventions, Accounting Basics

Accounting conventions

The phrase 'convention' is used to signify customs or ethnicity as a guide to the research of accounting statements. A variety of accounting conventions are in this way.

  • Convention of disclosure: This principle implies that accounts have to be honestly organized and all material information must be released therein. The term 'disclosure' implies that there is to be a enough disclosure of information which is of material interest to proprietors current and potential creditors and investors. This thought also be relevant to events occurring after the balance sheet date and the date on which the financial statements are authorized for issue, which are possible to have a significant influence on the earnings and financial position of the enterprise. Their non-disclosure would influence the capability of the users of such statements to make correct valuations and decisions.
  • Convention of materiality: As per this principle, financial statements should release all items which are material sufficient to achieve evaluations or decisions. The American Accounting Association (AAA) definite the context of "materiality" as "an item should be viewed as material if there is cause to believe that knowledge of it would manipulate the decision of informed investor". Unimportant items can be either left out or merged with other items. Occasionally, items are exposed as footnotes or in parentheses according to their relative significance.
  • Convention of consistency: reliability, as used in accounting, way that persistent application of the similar accounting events or method by a given firm from one time era to the next so that the financial statements of dissimilar periods can be compared significantly. This convention thus imply that in order to allow the management to draw significant and meaningful conclusions of concert over a period or between dissimilar firms, accounting practices should remain unaffected for a fairly long time.
  • Convention of conservatism: According to this convention, the accountant should be traditional in his/her approach belief and selection of process. In accounting, conservatism refers to the early acknowledgment of unfavorable events. For illustration, all achievable and expected losses must be offered for. But, alternatively, gains and other financial benefits should not be offered for if not they are relised. Alternatively, 'anticipate no profit and give for all possible losses'.
Posted Date: 10/15/2012 5:16:55 AM | Location : United States







Related Discussions:- Accounting conventions, Assignment Help, Ask Question on Accounting conventions, Get Answer, Expert's Help, Accounting conventions Discussions

Write discussion on Accounting conventions
Your posts are moderated
Related Questions
In earlier section, we had illustrated accounting as the language of business. Along with language, accounting has several dialects. There are dissimilarities in terminology. In de

Of the two, who is the ____ , Marie Antoinette or Anne Boleyn? (Points : 2) more famous most famous famouser Question 3. 3. The traffic where we live is _____

Q. Explain about Accounting transaction? An accounting transaction is a business event or activity that causes a measurable change in the accounting equation Assets = Liabiliti


I''m trying to figure out how do do a journal entry. The question reads...a company purchased land worth $49,000 for an office by paying $6,300 in cash and signing a long term note

Q. Define the Product costs? Product costs are costs earns in the acquisition or manufacture of goods. Since you will see in the next section included as product costs for purc

Explain in detail about the MERCHANDISE INVENTORY Cost of merchandise purchased during an accounting period is debited to Purchases account. To determine VALUE of the goods on

Hawkeye Electric Company engaged in the following transactions during July. Journalize the preceding transactions on the books of Hawkeye Electric Company using the perpetual sys

Q. Explain about Staff accountant? Let us travel with Tracy as she begins her career at the staff level. At the onset, she works directly under a senior accountant on each of h