Accounting Conventions

 

The following conventions are to be followed to have a clear and meaningful information and data in accounting:

 

i) Consistency: The convention of consistency refers to the state of accounting rules, concepts, principles, practices and conventions being observed and applied constantly, i.e., from one year to another there should not be any change. If consistency is there, the results and performance of one period can he compared easily and meaningfully with the other. It also prevents personal bias as the persons involved have to follow the consistent rules, principles, concepts and conventions. This convention, however, does not completely ignore changes. It admits changes wherever indispensable and adds to the improved and modern techniques of accounting.

 

 ii) Disclosure: The convention of disclosure stresses the importance of providing accurate, full and reliable information and data in the financial statements which is of material interest to the users and readers of such statements. This convention is given due legal emphasis by the Companies Act, 1956 by prescribing formats for the preparation of financial statements. However, the term disclosure does not mean all information that one desires to get should be included in accounting statements. It is enough if sufficient information, which is of material interest to the users, is included.


iii) Conservatism: In the prevailing present day uncertainties, the convention of conservatism has its own importance. This convention follows the policy of caution or playing safe. It takes into account all possible losses but not the possible profits or gains. A view opposed to this convention is that there is the possibility of creation of secret reserves when conservatism is excessively applied, which is directly opposed to the convention of full disclosure. Thus, the convention of conservatism should be applied very cautiously.

 

 

 

 

Reference

http://www.investopedia.com/terms/a/accounting-convention.asp

http://hyattractions.wordpress.com/2012/05/19/what-are-accounting-concepts-and-conventions/

http://www.slideshare.net/sukirat91/accounting-concepts-and-conventions

http://www.accounting4management.com/accounting_conventions.htm

http://www.acs.edu.au/info/business/management/accounting-standards.aspx

http://www.wisegeek.org/what-is-an-accounting-convention.htm

http://www.cibam.net/financial-accounting-principles-concepts-and-conventions-of-accounting-meaning-definition-and-objectives-of-accounting/

http://my.safaribooksonline.com/book/accounting/9788131775097/objective-4-basic-accounting-conventions/ch2_sub4_1_xhtml#X2ludGVybmFsX0h0bWxWaWV3P3htbGlkPTk3ODgxMzE3NzUwOTclMkZjaDJfc3ViNF8yX3hodG1sJnF1ZXJ5PQ==

http://icwai-2011.blogspot.in/2011/05/accounting-conventions-convention-of_3283.html

http://careerride.com/fa-accounting-conventions.aspx

http://ravindravarmadatla.blogspot.in/2011/05/accounting-concepts-and-conventions.html

 

 

 

 

Registration


A password will be e-mailed to you.

Feedback Form

Name (required)

Email (required)

Feedback