how the concepts and conventions of accounting help an organisation in effective management? explain with imaginery examples (please help 15 Mark assignment)
Answers
In drawing up accounting statements, whether they are external "financial accounts" or internally-focused "management accounts", a clear objective has to be that the accounts fairly reflect the true "substance" of the business and the results of its operation.
The theory of accounting has, therefore, developed the concept of a "true and fair view". The true and fair view is applied in ensuring and assessing whether accounts do indeed portray accurately the business' activities.
To support the application of the "true and fair view", accounting has adopted certain concepts and conventions which help to ensure that accounting information is presented accurately and consistently.
Explanation:
There are four widely recognized accounting conventions: conservatism, consistency, full disclosure, and materiality.
Accounting Conventions:
There are four main conventions in practice in accounting: conservatism; consistency; full disclosure; and materiality. Conservatism is the convention by which, when two values of a transaction are available, the lower-value transaction is recorded.
Following are the important accounting conventions in use:
Convention of Disclosure: ADVERTISEMENTS: ...
Convention of Consistency: Rules and practices of accounting should be continuously observed and applied. ...
Convention of Conservatism: ...
Convention of Materiality:
hope it will be helpful to you