Accounting Conventions- Guide for the Accountants

Home Assignment Answers Accounting Conventions- Guide for the Accountants

The customs and ethics that help the accountants at the time of conversing about the accounting report are covered under the term known as Accounting Conventions.

In order to walk in a consistent manner in the bookkeeping process (accounting), conventions were developed and advanced. Conventions are not the written documents; they are the laws that are unwritten. The accounting conventions are the traditions that the accountants adopt, that serves the purpose of a guide that helps in the preparation of accounting reports.

Following are some of the important accounting conventions, currently in use:

  1. Convention of Disclosure

The convention of disclosure says that the accounting statements should be prepared with full fairness and all the related private and important data should be revealed within it. the concentration should be on the material information and not the immaterial. The primary reason for this convention is to contact all material and related evidences of the financial performance, that have material interests to the investors.

  1. Convention of Consistency

The rules and regulations of the accounting cycle should be observed and checked regularly. For the management of the organization to come up to the conclusions, it is important for the company to practice the methods of accounting from one period to another. By using this type of conventions, there are high chances in the increase in the level of the accuracy, and comparability. This further, helps in the correct decision making in the company.

  1. Convention of Conservatism

The main essence of this convention is “anticipate no profit and provide for all possible losses”. Nobody knows about the future situations. Conservatism refers to the selection of suitable approach that further leads to irony against the overstatement of the resources and the earnings. If some error occurs in case of understatement, there are no serious issues for that, but on the other hand, there may occur serious consequences in the case of overstatement. This convention is very important at the time of preparing the financial reports.

  1. Convention of materiality

American Accounting Association defines the term materiality as “An item should be regarded as material if there is reason to believe that knowledge of it would influence the decision of informed investor”. The amount and the nature of the item are considered the basis on which the materiality depends. Accountants should make sure that all the elements are reported in a proper manner in any financial statement. All the items of the business whether small or large should be considered alike. The materiality convention indicates that the accounting treatment of some particular item shall be affected by its economic growth to some extent. Materiality in itself has some relative importance. The convention of materiality allows the accountants to ignore all the other accounting codes.

Related article: The Important Terminologies of Accounting

Search Here

Latest Reviews

  • Kannon
    13 Jul, 2019

    I asked for essay help from Assignment Help 4 Me and I am happy that the essay writers completed my task on time. The prices they asked for are worth in comparison to the services rendered.

  • Liam
    13 Jul, 2019

    Assignment Help 4 Me is the best help provider. I took assistance to get my essay completed and I am glad that the writers delivered the quality content as they promised within the time committed.

  • Silas
    12 Jul, 2019

    Accounting is a very interesting subject but when it comes to assignment writing, I feel hard to get through the same. But, since the assignments have to be completed somehow, I preferred to avail online help from Assignment Help 4 Me. All thanks to them that they helped me complete my work on time at reasonable prices.

View All Reviews


Assignment Help 4 Me