BY- AKSHIT GARG

ACCOUNTING CONVENTIONS

ACKNOWLEDGEMENT

I Would like to thank Ms. Bushra For giving me this assignment and without her guidance this work would not have been possible

CONTENTS

MEANING OF ACCOUNTING CONVENTIONS

TYPES OF ACCOUNTING CONVENTIONS

DIFFERENCE B/W ACCOUNTING CONVENTIONS & ACCOUNTING CONCEPT

ACCOUNTING CONVENTIONS

An accounting convention may be defined as a custom or generally accepted practice which is adopted either by general agreement or by common consent among the accountants

1. CONVENTION OF FULL DISCLOSURE

Information relating to the economic affairs of the enterprise should be completely disclosed which are of material interest to the users

Proforma & contents of balance sheet and P&L accounts are prescribed by companies act

It doesn’t mean that leaking out the secrets of the business.

2. CONVENTION OF CONSISTENCY

Accounting methods should remain consistent through out the year

This facilitates comparison in both directions i.e., intra firm and inter firm

This does not mean that firm can not change the accounting methods according to the changed circumstances of the business

3. CONVENTION OF CONSERVATISM All anticipated losses should be

recorded but all anticipated gains should be ignored.

It is a policy of playing safe Provisions is made for all the

losses even though the amount can not be determined with certainity

4. CONVENTION OF MATERIALITY

According to AMERICAN ACCOUNTION ASSOCIATION “An item item should be regarded as material if there is reason to believe that knowledge of it would influence the decision of informed investor”

It is an exception to the convention of full disclosure

Items having insignificant effect to the users need not to be disclosed

DIFFERENCE B/W CONCEPTS & CONVENTIONSBASIS ACCOUNTING

CONCEPTSACCOUNTING CONVENTIONS

Established

By law Guidelines based upon customs or usage

Biasness No space for personal biasness in the adoption

Biasness in adoption

Uniformity Uniform adoption

No uniform adoption

THE END