Accounting conventions, Accounting Basics

Assignment Help:

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'.

Related Discussions:- Accounting conventions

Proprietorship , After adjustments and the closing of revenue and expense a...

After adjustments and the closing of revenue and expense accounts at February 28, 2015, the end of the first full year of operations, the income summary account has a credit balanc

Planning and budgeting, Consider the following 2008 data for Newark General...

Consider the following 2008 data for Newark General Hospitals (in millions of dollars Simple Budget_______Flexible Budget_ Actual Budget__ Revenue______$4.7$____4.8_____$4.5____.

Accounting Transactions, Give me some problems in acoounting transactions s...

Give me some problems in acoounting transactions so I can answer it.

Explain about lower-of-cost-or-market method, Q. Explain about lower-of-cos...

Q. Explain about lower-of-cost-or-market method? The lower-of-cost-or-market (LCM) method is the inventory costing method that values inventory at the lower of its historical c

Ethics on reconstruction of accounts, If a customer payment data was lost a...

If a customer payment data was lost and needed to be reconstructed what are some of the ethical considerations the business owner would need to consider? This may include internal

High-fiber diet for diverticular disease, Q. High-fiber Diet for diverticul...

Q. High-fiber Diet for diverticular disease? For mild symptoms, a clear liquid diet is recommended. More serious cases may require hospitalization, intravenous feeding to rest

CASE ASSIGNMENT, PRICE FOR A 3-6 PAGE PAPER IN APA FORMAT

PRICE FOR A 3-6 PAGE PAPER IN APA FORMAT

How to manage barter income?, How to create account for barter transactions...

How to create account for barter transactions? As My Company is providing a service to another company and that company is reimbursing us with his service.

Describe the cost of sales, Q. Describe the Cost of sales? Cost of sale...

Q. Describe the Cost of sales? Cost of sales, cost of goods sold -- expense or cost of all items sold during an accountingperiod. Every unit sold has a cost of sales or cost of

Explain about equity or net asset, Q. Explain about Equity or net asset? ...

Q. Explain about Equity or net asset? An equity or net asset is the residual interest in the assets of an entity that remains subsequent to deducting its liabilities and in the

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd