ACCOUNTING CONCEPTS

AND CONVENTIONS
Lecture Outcomes

Comprehend the
framework of principles
and conventions that
governs the system of
accounting
 Relevant NEWS

By: Chitsimran 3
Accounting
Conventions
Accounting Conventions are the common
practices which are universally followed in
recording and presenting accounting information
of business. It helps in comparing accounting data
of different business or of same units for different
periods.
Materiality
Only those
transactions,
important facts
and items are
shown which are
useful and material
for the business.
The firm need not
record immaterial
and insignificant
items.
 Full
Disclosure
Financial
Statements and
their notes should
present all
information that is
relevant and
material to the
user’s
understanding of
the statements.
Conservatism
Anticipate No Profits but
Provide for all Losses
Accountant should always be on side of safety.
For Example
• Making Provision for Bad and Doubtful Debts
• Showing Depreciation on Fixed Assets, but not
appreciation
•Stock valuation sticks to rule of the lower of cost and
net realizable value
Consistency
The accounting practices and methods should
remain consistent from one accounting period to
another.

Whatever accounting practice is followed by the

business enterprise, should be followed on a
consistent basis from year to year.
For Example

Year 2017-18 2018-19 2019-20

Method of • Straight • Written • Units of

Depreciation Line Down Measure
followed Method Value Method
Method
MCQ
According to Principle of Conservatism

• Provision is made for bad and doubtful debts

• Depreciation is charged on assets
• Recording is made of outstanding expenses
• All of the above
According to Principle of Conservatism

• Provision is made for bad and doubtful

debts
• Depreciation is charged on assets
• Recording is made of outstanding expenses
• All of the above
Due to which of the following, contingent
liabilities are shown in the Balance Sheet:

• Dual aspect
• Full disclosure
• Materiality
• Going concern
Due to which of the following, contingent
liabilities are shown in the Balance Sheet:

• Dual aspect
• Full disclosure
• Materiality
• Going concern
According to which principle the same
accounting methods should be used each year:

• Prudence
• Full disclosure
• Materiality
• Consistency
According to which principle the same
accounting methods should be used each year:

• Prudence
• Full disclosure
• Materiality
• Consistency
Omission of paise and showing the round figures
in financial statements is based on

• Conservatism
• Consistency
• Materiality
• Money measurement
Omission of paise and showing the round figures
in financial statements is based on

• Conservatism
• Consistency
• Materiality
• Money measurement
THANK YOU!