What do you mean by accounting concepts and conventions? Explain briefly important accounting concept.
Answers
Accounting concepts are the basic assumptions or fundamental propositions within which accounting operates.They are generally accepted accounting rules based on which transactions are recorded and financial statements are prepared.
Accounting conventions are the outcome of accounting practices or principles being followed by the enterprises over a period of time .Conventions may undergo a change with time to bring about improvement in the quality of accounting information.
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Important and fundamental accounting concepts :-
1) Going Concern Assumption: It is assumed that business shall continue for a foreseeable period and there is no intention to close the business.
2)Consistency Assumption: Accounting practices once selected and adopted, should be applied consistently year after year.The concept helps in better understanding of accounting information.
3)Accrual Assumption: A transaction is recorded in the books of account at the time when it is entered into and not when the settlement takes place.
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Answer:
Accounting concepts refers back to the guidelines of accounting which might be to be observed, whilst recording commercial enterprise transactions and making ready very last accounts.
Accounting conventions implies the customs or practices which can be extensively prevalent through the accounting bodies and are followed through the corporation to work as a manual withinside the preparation of final accounts.
Explanation:
Accounting is a commercial enterprise language, that's used to speak monetary facts to the company’s stakeholders, concerning the performance, profitability and function of the company and assist them in rational selection making. The monetary assertion is primarily based totally on numerous principles and conventions. Accounting principles are the essential accounting assumptions that act as a basis for recording commercial enterprise transactions and preparation of final accounts.
On the opposite extreme, accounting conventions are the strategies and procedures that have usual acceptance. These are observed through the corporation whilst recording transactions and preparation of monetary assertion.