REPORT

ON

CONCEPT AND CONVENTIONS

OF ACCOUNT
Submitted in Partial Fulfillment of the Requirements

for the Degree of

Bachelor of Business Administration

(BBA 1ST Year)

Submitted By

JATIN PRATAP SINGH

Roll No.

Submitted to

MR. D.K. SINGH

(Head of the Department)

DEPARTMENT OF BUSINESS ADMINISTRATION

ALIGARH COLLEGE OF ENGINEERING AND TECHNOLOGY

Affiliated to Raja Mahendra Pratap Singh State University, Aligarh

 DECLARATION

I hereby declare that the work, which is being presented in the Project Report entitled

“CONCEPT AND CONVENTIONS OF ACCOUNT” is a bonafied record of work carried

by me, submitted to partialfulfillment of requirement for the award of degree Bachelor Of

Business Administration from Aligarh College Of Engineering and Technology, Aligarh,

U.P.(India).

I have not submitted the matter embodied in this project for the award of any other

degree or diploma.

Sign:

Name: JATIN PRATAP SINGH

 ACKNOWLEDGEMENT

The satisfaction and euphoria that accompany the successful completion of any task would be

incomplete without mentioning the names of people who made it possible, whose constant

guidance and encouragement crowns all efforts with our success.

I extend my gratitude to Mr. D.K. Singh, Head – Department of Business Administration,

Aligarh College of Engineering and Technology Aligarh, Uttar Pradesh for providing me with

excellent infrastructure and awesome environment that laid potentially strong foundation for

my professional life.

I would like to express my profound thanks to Ms.Parul Varshney (Assistant Professor),

project supervisor who guided me throughout the project tenure, provided me each and every

detail, references, and technical helps without which it was impossible to complete this project.

Finally, I also wish to thanks to GOD for supporting me during my whole project work.

JATIN PRATAP SINGH

 TABLE OF CONTENT

1. Declaration

2. Acknowledgement

3. Introduction

4. Main objective of financial accounting

5. Concept of financial accounting

6. Why concepts are necessary in accounting

7. Conventions of financial accounting

8. Areas where accounting conventions apply

9. How accounting conventions work

10. Difference between accounting concept and accounting conventions

11. Conclusion

12. References
CONCEPT AND CONVENTIONS OF

ACCOUNT
 INRODUCTION

Business is an economic activity undertaken with the motive of earning profits and to maximize

the wealth for the owners. Business cannot run in isolation. Largely, the business activity is carried

out by people coming together with a purpose to serve a common cause. This team is often referred

to as an organization, which could be in different forms such as sole proprietorship, partnership.,

body corporate etc. The rules of business are based on general principles of trade, social values,

and statutory framework encompassing national or international boundaries. While these variables

could be different for different businesses, different countries etc., the basic purpose is to add

value to a product or service to satisfy customer demand. The business activities require resources

(which are limited & have multiple uses) primarily in terms of material, labour, machineries,

factories and other services. The success of business depends on how efficiently and effectively

these resources are managed. Therefore, there is a need to ensure that the businessman tracks the

use of these resources. The resources are not free and thus one must be careful to keep an eye on

cost of acquiring them as well. As the basic purpose of business is to make profit, one must keep

an ongoing track of the activities undertaken in course of business. Two basic questions would

have to be answered: (a) What is the result of business operations? This will be answered by

finding out whether it has made profit or loss. (b) What is the position of the resources acquired

and used for business purpose? How are these resources financed? Where the funds come from?

The answers to these questions are to be found continuously and the best way to find them is to

record all the business activities. Recording of business activities has to be done in a scientific

manner so that they reveal correct outcome. The science of book-keeping and accounting provides

an effective solution. It is a branch of social science. This study material aims at giving a platform

to the students to understand basic principles and concepts, which can be applied to accurately

measure performance of business. After studying the various chapters included herein, the student
should be able to apply the principles, rules, conventions and practices to different business

situations like trading, manufacturing or service. Over years, the art and science of accounting has

evolved together with progress of trade and commerce at national and global levels. Professional

accounting bodies have been doing intensive research to come up with accounting rules that will

be applicable. Modern business is certainly more complex and continuous updating of these rules

is required. Every stakeholder of the business is interested in a particular facet of information

about the business. The art and science of accounting helps to put together these requirements of

information as per universally accepted principles and also to interpret the results. It is interesting

to note that each one of us has an accountant hidden in us. We do see our parents keep track of

monthly expenses. We make a distinction between payment done for monthly grocery and that

for buying a house or a car. We understand that while grocery is a monthly expense and buying a

house is like creating a resource that has indefinite future use. The most common accounting

record that each one of us knows is our bank passbook or a bank statement, which the bank

maintains for us. It tracks each rupee that we deposit or wthdraw from our account. When we go

to supermarket to buy something, the cashier at the counter will record things we buy and give us

a 'bill' or 'cash memo'. These are source documents prepared for the transaction between the

supermarket and us. While these are simple examples, there could be more complex business

activities. Agood working knowledge of keeping records is therefore necessary. Professional

accounting bodies all over the world have been functioning with the objective of providing this

body of knowledge. These institutions are engaged in imparting training in the field of accounting.

Let us start with some basic definitions, concepts, conventions and practices used in development

of this art as well as science.

 MAIN OBJECTIVES OF FINANCIAL ACCOUNTING

The main objective of Accounting is to provide financial information to stakeholders. This

financial information is normally given via financial statements, which are prepared on the basis

of Generally Accepted Accounting Principles (GAAP). There are various accounting standards

developed by professional accounting bodies all over the world. In India, these are governed by

The Institute of Chartered Accountants of India, (ICAI). In the US, the American Institute of

Certified Public Accountants (AICPA) is responsible to lay down the standards. The Financial

Accounting Standards Board (FASB) is the body that sets up the International Accounting

Standards. These standards basically deal with accounting treatment of business transactions and

disclosing the same in financial statements.

The following objectives of accounting will explain the width of the application of this

knowledge stream:

(a) To ascertain the amount of profit or loss made by the business i.e. to compare the income

earned versus the expenses incurred and the net result thereof.

(b) To know the financial position of the business ie. to assess what the business owns and what

it owes.

(c) To provide a record for compliance with statutes and laws applicable.

(d) To enable the readers to assess progress made by the business over a period of time.

(e) To disclose information needed by different stakeholders. Let us now see which are different

stakeholders of the business and what do they seek from the accounting information. This is

shown in the following table.

 CONCEPTS AND CONVENTIONS OF FINANCIAL ACCOUNTING

ACCOUNTING CONCEPTS

In India, there are several rules which need to be followed while walking or driving on the road

as it enables the smooth flow of trafic. Similarly, there are accounting rules that an accountant

should follow while recording business transactions or recording accounts. They may be

termed as accounting concepts. Hence, it can be said that: "The term accounting concepts refer

to basic rules, assumptions, and principles which act as a primary standard for recording

business transactions and maintaining books of accounts".

OBJECTIVES OF ACCOUNTING CONCEPTS

1.The primary aim of accounting is to maintain uniformity and regularity in the preparation of

accounting statements

2. Accounting concepts act as an underlying principle that helps accountants in the preparation

and maintenance of business records.

3. It aims to understand the business rules and regulations that are required to be folowed by all

types of business entities, and hence simplifying the detailed and comparable financial

information.
DIFFERENT ACCOUNTING CONCEPTS

Following are the different accounting concepts that are widely used all around the world and

hence are termed as universally accepted accounting rules. The different accounting concepts

are:

1.Business Entity Concept - This concept assumes that the organization and business owners

are two independent entities. Hence, the business translation and personal transaction of its

Owner are different. For example, when the business owner invests his money in the business, it

is recorded asa liability of the business to the owner. Similarly, when the owner takes away from

the business cash/goods for his/her personal use, it is not treated as a business expense. Thus, the

accounting transactions are recorded in the books of accounts from the organization's point of

view and not the person owning the business. Example:Suppose Mr. Birla started a business. He
invested Rs 1, 00, 000. He purchased goods for Rs 50,000, furniture for Rs. 40,000, and plant

and machinery for Rs. 10,000 and Rs 2000 remained in hand. These are the assets of the

business and not of the business owne. According to the business entity concept, Rs.1,00,000

will be assumed by a business as capital i.e. a liability of the business towards the owner of the

business. Now suppose, he takes away Rs. 5000 cash or goods for the same worth for his

domestic purposes. This withdrawal of cash/goods by the owner from the business is his private

expense and not the business expense. It is termed as Drawings. Therefore, the business entity

Concept states that the business and the business owner are two separateldistinct persons.

Accordingly, any expenses incurred by the owner for himself or his family from business will be

considered as expenses and it will be represented as drawings.

2. Accrual Concept - The term accrual means something is due, especially an amount of money

that is yet to be paid or received at the end of the accounting period. It implies that revenue is

realized at the time of sale through cash or not whereas expenses are recognized when they

become payable whether cash is paid or not. Therefore, both the transactions are recorded in the

accounting period in which they relate. In the accounting system, the accrual concept tells that

the business revenue is realized at the time goods and services are sold irrespective of the fact

when cash is received for the same. For example, On March 5, 2021, the firm sold goods for Rs

55000, and the payment was not received until April 5, 2021, the amount was due and payable

to the firm on the date goods and services were sold i.e. March 5, 2021. It must be included in

the revenue for the year ending March 31, 2021. Similarly, expenses are recognized at the time

services are provided, irrespective of the fact that cash paid for these services are made. For

example, if the firm received goods costing Rs.20000 on March 9, 2021, but the payment is

made on April 7, 2021, the accrual concept requires that expenses must be recorded for the year
ending March 31, 2021, although no payment has been made until this date though the service

has been received and the person to whom the payment should have been made is represented as

a creditor of business firm.In brief, the accrual concept states that revenue is recognized when

realized and expenses are recognized when they become due and payable irrespective of the

cash receipt or cash payment.

3. Accounting Cost Concept- The accounting cost concept states all the business assets should

be written down in the book of accounts at the price assets are purchased, including the cost of

acquisition, and installation. The assets are not recorded at their market price. It implies that the

fixed assets like plant and machinery, building, furniture, etc are recorded at their purchase

price. For example, a machine was purchased by ABC Limited for Rs.10,00,000, for

manufacturing bottles. An amount of Rs.2,000 was spent on transporting the machine to the

factory site. Also, Rs.2000 was additionally spent on its installation. Hence, the total amount at

which the machine will be recorded in the books of accounts would be the total of all these items

i.e. Rs. 10, 040, 00. This cost is also termed as historical cost.

4. Dual Aspect -The dual aspect is the basic principle of accounting. It provides the basis for

recording business transactions in the books of accounts. This concept assumes that every

transaction recorded in the books of accountants is based on dual concepts. This implies that the

transaction that is recorded affects two accounts on their respective opposite sides. Hence, the

transaction should be recorded at dual places. It implies that both aspects of the transaction

should be recorded in the books of account. For example, goods purchased in exchange for cash

have two aspects such as paying cash and receiving goods. Therefore, both the aspects should be

registered in the books of accounts. The duality of the transaction is commonly expressed in the
terms of the following equation given below:. Assets = Liabilities + Capital The dual concept

implies that every transaction has a similar effect on assets and liabilities in such a way that the

value of total assets is always equal to the value of total liabilities.

5. Going Concepts - The Going concept in accounting states that a business activities will be

carried by any firm for an unlimited duration This simply means that every business has

continuity of life. Hence, it will not be dissolved shortly. This is an important assumption of

accounting as it provides a base for representing the asset value in the balance sheet.For

example, the plant and machinery was purchased by a company of Rs. 10 lakhs and its life span

is 10 years. According to the Going concept, every year some amount of assets purchased by the

business will be represented as an expense and the balance amount will be shown as an asset in

the books of accounts. Thus, if an amount is incurred on an item that will be used in business for

several years ahead, it will not be proper to charge the amount from the revenues of that

particular year in which the item was purchased Only a part of the purchase value is shown as an

expense in the year of purchase and the remaining balance is shown as an asset in the balance

sheet.

6. Money Measurement Concept - The money measurement Concept assumes that the

business transactions are made in terms of money i.e. in the currency of a country. In India, such

transactions are made in terms of the rupee. Hence, as per the money measurement concept,

transactions that can be expressed in terms of money should be recorded in books of accounts.

For example, the sale of goods worth Rs. 10000, purchase of raw material Rs. 5000, rent paid

Rs.2000 are expressed in terms of money, hence these transactions can be recorded in the books

of accounts.
7. Accounting Period Concepts -Accounting period concepts state that all the transactions

recorded in the books of account should be based on the assumption that profit on these

transactions is to be ascertained for a specific period. Hence this concept says that the balance

sheet and profit and loss account of a business should be prepared at regular intervals. This is

important for different purposes like calculation of profit and loss, tax calculation, ascertaining

financial position, etc. Also, this concept assumes that business indefinite life is divided into two

parts. These parts are termed accounting periods. It can be one month, three months, siX

months, etc. Usually, one year is considered as one accounting period which may be a calendar

year or financial year.The year that begins on January 1 and ends on January 31 is termed as

calendar year whereas the year that begins on April 1 and ends on March 31 is termed as

financial year.

8. Realization Concept - The term realization concept states that revenue earned it is realized

from any business transaction should be included in the accounting records only when it is

released. The term realization implies the creation of a legal right to receive money. Hence, it

should be noted that selling goods is considered as realization whereas receiving order is not

considered as realization.In other words, the revenue concept states that revenue is realized

when cash is received or the right to receive cash on the sale of goods or services or both have

been created.

9. Matching Concepts - The Matching concept states that revenue and expenses incurred to

earn the revenue must belong to the same accounting period. Hence, once revenue is realized,

the next step is to assign the relevant accounting period. For example, if you pay a commission
to a salesperson for the sale that you record in March. The commission should also be recorded

in the same month.The matching concept implies that all the revenue earned during an

accounting year whether received or not during that year or all the expenses incurred whether

paid or not during that year should be considered while determining the profit and loss of the

business for that year. This enables the investors or shareholders to know the exact profit and

loss of the business.

10. varifiable objective concept - This principle justify the significance of verifiable documents

supporting various transactions. According to it, each transaction should be supported by

Objective evidence like Voucher. Objective evidence, here, means evidence free from bias of

the accountant.

11. revenue recognition - Revenue recognition is a critical aspect of financial accounting that

determines the specific conditions under which income becomes realized as revenue. It’s the

process of recognizing or reporting income as it is earned, essentially matching the revenue from

contracts to the expenses related to generating those sales. This ensures that a company’s

financial records are accurate and transparent, aiding in decision-making and providing investors

with an up-to-date picture of a business’s financial situation.

 WHY CONCEPTS ARE NECESSARY IN ACCOUNTING

Accountants are professionals who record the financial transactions of a company. Periodic

summaries of these transactions or financial reports give managers, investors, analysts and the

government relevant financial information about a company. If every business follows an

independent system for creating and producing summaries and statements, it could lead to

discrepancies and increase the scope of fraud and financial mismanagement. To overcome this,

accounting bodies, governments and regulatory agencies use a universally agreed-upon set of

principles to standardise accounting practises.

ADVANTAGES OF ACCOUNTING CONCEPTS

1. Provides a framework for consistent financial reporting: Accounting concepts provide a

set of guidelines and principles that ensure financial statements are prepared and presented in

a consistent and comparable way.

2. Enhances the understanding and interpretation of financial statements: Accounting

concepts such as the accrual basis of accounting, the matching principle, and the concept of

conservatism provide a framework for understanding and interpreting financial statements.

3. Facilitates decision making: Accounting concepts such as liquidity, solvency, and

profitability provide important information for decision making.

4. Enhances the comparability of financial statements: Accounting concepts ensure that

financial statements are prepared in a consistent manner, which allows for easy comparison

between companies and industries.

5. Provides a basis for financial analysis: Accounting concepts provide the basis for financial

analysis and ratio analysis, which helps in evaluating a company's performance and financial

health.

6. Meets the needs of different stakeholders: Accounting concepts provide information that

is relevant to different stakeholders such as investors, creditors, and managers.

7. Enhances transparency and accountability: Accounting concepts ensure that financial

statements are prepared in a transparent and accountable manner, which enhances the trust

and confidence of users of financial statements.

DISADVANTAGES OF ACCOUNTING CONCEPTS

1. Complexity: The principles and guidelines of accounting concepts can be complex and

difficult to understand for those without a strong background in accounting.

2. Lack of flexibility: Accounting concepts provide a framework for financial reporting that

may not be able to adapt to new or unique situations.

3. Subjectivity: The application of accounting concepts can be subjective, which can lead to

different interpretations and conclusions.

4. Limited relevance: Some accounting concepts may not be relevant or useful in certain

industries or situations.

5. Limited usefulness for decision-making: Some concepts may not provide meaningful

information for decision-making and may not be useful for certain stakeholders.

6. Focus on historical data: Accounting concepts focus on historical data, which may not be

relevant or useful for predicting future performance.

7. Limited comparability: While accounting concepts aim to improve comparability, the

application of accounting concepts can vary between different companies and industries,

making it difficult to compare financial statements.

 ACCOUNTING CONVENTIONS

Accounting conventions are guidelines used to help companies determine how to record certain

business transactions that have not yet been fully addressed by accounting standards. These

procedures and principles are not legally binding but are generaly accepted by accounting

bodies. Basically, they are designed to promote consistency and help accountants overcome

practical problems that can arise when preparing financial statements.

Accounting is full of assumptions, concepts, standards, and conventions. Concepts such as

relevance, reliability, materiality, and comparability are often supported by accounting

conventions that help to standardize the financial reporting process .

In short, accounting conventions serve to fill in the gaps not yet addressed by accounting

standards. If an oversight organization, such as the Securities and Exchange

Commission (SEC) or the Financial Accounting Standards Board (FASB) sets forth a guideline

that addresses the same topic as the accounting convention, the accounting convention is no

longer applicable.

The scope and detail of accounting standards continue to widen, meaning that there are now

fewer accounting conventions that can be used. Accounting conventions are not set in stone,

either. Instead, they can evolve over time to reflect new ideas and opinions on the best way to

record transactions.
Key features of accoutning conventions -

• Accounting conventions are guidelines used to help companies determine how to

record business transactions not yet fully covered by accounting standards.

• They are generally accepted by accounting bodies but are not legally binding.

• If an oversight organization sets forth a guideline that addresses the same topic as the

accounting convention, the accounting convention is no longer applicable.

Importance of accounting conventions in Financial Reporting

Accounting conventions are crucial for several reasons:

1. Consistency

Consistency in financial reporting ensures that financial statements from one period to another are

comparable. This consistency allows investors, creditors, and other stakeholders to make informed

decisions.

2. Reliability

By following established conventions, financial information becomes reliable.

3. Transparency

Accounting conventions help in presenting financial information transparently, reducing the

likelihood of manipulation or misrepresentation of financial data

How To Interpret An Accounting Convention

Sometimes, a certain circumstance is not governed by a clear rule in the accounting standards. In

these circumstances, accounting conventions may be used.

There are many presumptions, conceptions, norms, and traditions in accounting. Accounting

norms that support concepts like relevance, dependability, materiality, and comparability often

work to standardize the financial reporting process.

In other words, accounting conventions fill in the areas where accounting standards fall short.

The accounting convention is no longer relevant if a regulatory body, such as The Securities

and Exchange Commission (SEC) or Financial Accounting Standards Board (FASB),

establishes a standard that covers the same subject.

There are currently fewer accounting conventions that can be used as the scope and level of

complexity of accounting standards continue to grow. Even accounting practices are not rigid

rules. Alternatively, they can change over time to reflect fresh perspectives on the most effective

ways to record transactions.

Accounting norms are crucial because they guarantee that transactions are recorded uniformly

by several organizations. Investors may more easily evaluate the financial performance of

various companies, including rival ones operating in the same sector, by using a consistent

technique. Despite this, accounting practices are far from perfect. They can be vaguely defined

at times, giving businesses and their accountant's room to possibly bend or exploit them to their

benefit.
METHOD OF ACCOUNTING CONVENTIONS

There are five main accounting conventions in existence. Namely, consistency, full disclosure,

convention of materiality, conservatism, and cost-benefit. Concepts like relevance, reliability,

materiality, and comparability are usually supported by accounting conventions. They help to

simplify the financial chronicling process.

If supervising organizations such as the Securities and exchange commission (SEC) or the

financial accounting standards board (FASB) put ahead standards that address the same topic as

the accounting convention, the conventions are void. Let us now see and understand the five

main accounting conventions:

1. Conservatism: Playing it safe is both an accounting principle and convention. It tells

accountants to err on the side of caution when providing estimates for assets and

liabilities. That means that when two values of a transaction are available, the lower one

should be favored. The general concept is to factor in the worst-case scenario of a firm’s

financial future.

2. Consistency: A company should apply the same accounting principles across

different accounting cycles. Once it chooses a method it is urged to stick with it in the

future, unless it has a good reason to do otherwise. Without this convention, investors'

ability to compare and assess how the company performs from one period to the next is

made much more challenging.

3. Full disclosure: Information considered potentially important and relevant must be

revealed, regardless of whether it is detrimental to the company.

4. Materiality: Like full disclosure, this convention urges companies to lay all their cards

on the table. If an item or event is material, in other words important, it should be

disclosed. The idea here is that any information that could influence the decision of a

person looking at the financial statement must be included.

 AREAS WHERE ACCOUNTING CONVENTIONS APPLY

Accounting conservatism may be applied to inventory valuation. When determining the

reporting value of inventory, conservatism dictates that the lower of historical cost or

replacement cost should be the monetary value.

Accounting conventions also dictate that adjustments to line items should not be made for

inflation or market value. This means book value can sometimes be less than market value. For

example, if a building costs $50,000 when it is purchased, it should remain on the books at

$50,000, regardless of whether it is worth more now.

Estimations such as uncollectible accounts receivables and casualty losses also use the

conservatism convention. If a company expects to win a litigation claim, it cannot report the

gain until it meets all revenue recognition principles.

HOW ACCOUNTING CONVENTIONS WORK

Essentially, there is a variety of accounting conventions that are followed to make sure that

companies register their finances precisely. One such principle is conservatism that needs

accountants to be cautious and opt for such solutions that delineate least favourably on the

bottom line of a company during uncertain times. However, this method is not objectified to

manipulate the amount or timing of financial figures reporting. On the contrary, accounting

conservatism offers guidance when the need for estimation or uncertainty takes place, meaning

such situations where an Accountant can be biased. This method also establishes various rules

while deciding between two different alternatives to financial reporting. For instance, in case an

accountant has two solutions to select from while experiencing an accounting challenge, he must

go with the one that provides inferior numbers.

ADVANTAGES OF ACCOUNTING CONVENTIONS

1. Provides consistency and comparability in financial reporting across different companies and

industries.

2. Helps investors and analysts understand and interpret financial statements.

3. Helps to ensure that financial information is presented in a clear and transparent manner.

4. Facilitates decision making by providing accurate and reliable information.

5. Provides a framework for the preparation and presentation of financial statements.

6. Helps to prevent fraud and misrepresentation of financial information.

7. Provides a basis for the development of accounting standards and regulations

DISADVANTAGES OF ACCOUNTING CONVENTIONS

1. May not fully reflect the true economic reality of a company or its financial position.

2. Can be complex and difficult for non-experts to understand.

3. May lead to a focus on short-term results rather than long-term sustainability.

4. Can be subject to manipulation and bias, leading to inaccurate financial reporting.

5. Can be costly to implement and comply with.

6. May not be suitable for all types of businesses or industries.

7. Can be hindered by cultural and language barriers.

 DIFFERENCE BETWEEN ACCOUNTING CONCEPTS AND

ACCOUNTING CONVENTIONS.

1. Accounting concepts refer to the fundamental principles and guidelines that govern the

preparation and presentation of financial statements, such as the going concern concept and the

accrual concept. Accounting conventions, on the other hand, refer to the established practices

and rules that are commonly used in accounting, such as the use of double-entry accounting and

the historical cost convention.

2. Accounting concepts are based on theoretical principles and are considered to be universal in

nature, whereas accounting conventions are specific to a particular country or region.

Accounting concepts are essential for ensuring the reliability and comparability of financial

statements, whereas accounting conventions are used to ensure consistency and uniformity in

accounting practices.

3. Accounting concepts are developed by professional bodies such as the Institute of Chartered

Accountants of India (ICAI) and the Institute of Cost Accountants of India (|CAlI), whereas

accounting conventions are established by the Ministry of Corporate Affairs (MCA) and the

Reserve Bank of India (RBI).

4. Accounting concepts are mandatory and must be followed by all entities, whereas accounting

conventions are optional and may be followed at the discretion of the entity.
5. Accounting concepts are based on economic reality, whereas accounting conventions are

based on practicality and feasibility.

6. Accounting concepts are used to determine the recognition and measurement of transactions,

whereas accounting conventions are used to determine the presentation and disclosure of

transactions.

7. Accounting concepts are subject to change based on new developments and changes in

economic conditions, whereas accounting conventions are relatively stable and change less

frequently.

8. Accounting concepts are used to ensure the transparency and integrity of financial

statements, whereas accounting conventions are used to ensure the efficiency and ease of

accounting practices.
 CONCLUSION

In conclusion, applying the accounting concept in the business is essential as it

provides quantitative information to the overview of the business performance. Accounting is a

service activity. Keeping our accounting records clean and up to date is very important in

making sure our business relevant in today's business environment that is much

more complex and dynamic. Proper accounting gives more benefits to the business as it helps in

evaluating the performance of a business, helps businesses to be statutory compliant, build

business goalsetting, and helps to manage and monitor cash flow. To manage a business

smoothly in daily business activities accounting is a must as it can help in its future growth of

the business. So, The Real need to apply an accounting system in our managing of the business.

Other than that, to sustain in a very highly competitive marketing world, The Real Sdn. Bhd.

Should continue to keep revising its vision and mission. In my opinion, the owners need to find

and appoints someone who has qualifications, knowledge, and skills in helping him

applying the accounting system properly in the management of the business to ensure

that The Real has a good management and finance system. This will give not only short-term

benefits but also long-term benefits to The Real torun smoothly for a long time. Besides,

the business needs to boost more revenues by increasing its non-operating

transactions. Last but not least, the owners also need to do various promotion activities so

that the business lasted for a long time.

Accounting conventions, in a sense, are the “rules of the road” for financial reporting. They’re

the guiding principles that help companies, big and small, make sense of their numbers and

communicate their financial stories to the world. Imagine a world without these rules—financial

chaos, right?
But here’s the twist. While accounting conventions might seem rigid, there’s an art to them too.

In this blog, we’re going to unravel the mystery behind these conventions. We’ll dive into their

advantages, discuss their role in shaping industries, and explore their impact on the global

stage.

accounting conventions play a crucial role in financial reporting, offering both advantages and

disadvantages. Industry-specific considerations and unique challenges require tailored solutions.

The move towards international conventions aims to standardize reporting but also faces

adoption challenges. Future trends in accounting conventions will likely be influenced by

technology, evolving reporting practices, and a growing emphasis on environmental and social

factors in financial reporting. Adapting to these changes will be essential for companies and

professionals in the accounting field.

 REFERENCES

https://www.wikipedia.org/

https://josephscollege.ac.https://www.indeed.com/career-advice/career-development/accounting-

concepts-vs-conventionsin/lms/Uploads/pdf/material/AccountingConceptsandConventions.pdf

Textbook – Fundamentals of accounting by DR. C.K. Shah

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