Question

Explain A)convention Of Conservation B)convention Of Materiality C) Convention Of Consistency

Answer 1

Answer:

Explanation:

a)      Convention of Conservation This accounting convention is mostly expressed as to “anticipate all the future losses and expenses, without considering the future incomes and profits unless they are actually realized.” It emphasizes that profits should never be overstated or anticipated. This convention normally applicable to the valuation of current assets as they are valued at cost or market price whichever is lower.

 

b)     Convention of Materiality  This convention proposed that while accounting only those transactions will be considered which have material impact on financial status of the organization and other transactions which have insignificant effect will be ignored. It gives relative importance to an item or event. That is to say a transaction which will influence the economic decision of users of financial information is regarded as material.

 

c)      Convention of Consistency This convention illustrate that the same accounting principles, procedures and policies when once applied or used should be used regularly on a period to period basis for preparing financial statements to facilitate comparison of financial statements on period to period basis. If any changes are made in the accounting procedures or policies, then it should be disclosed explicitly while preparing the financial statements

Answer 2

Answer:

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A ) Convention of Conservation This accounting convention is mostly expressed as to “anticipate all the future losses and expenses, without considering the future incomes and profits unless they are actually realized.” It emphasizes that profits should never be overstated or anticipated. This convention normally applicable to the valuation of current assets as they are valued at cost or market price whichever is lower.

 

b)     Convention of Materiality  This convention proposed that while accounting only those transactions will be considered which have material impact on financial status of the organization and other transactions which have insignificant effect will be ignored. It gives relative importance to an item or event. That is to say a transaction which will influence the economic decision of users of financial information is regarded as material.

 

c)      Convention of Consistency This convention illustrate that the same accounting principles, procedures and policies when once applied or used should be used regularly on a period to period basis for preparing financial statements to facilitate comparison of financial statements on period to period basis. If any changes are made in the accounting procedures or policies, then it should be disclosed explicitly while preparing the financial statements