Meaning of Accounting Convention
Accounting Conventions are the guidelines, customs, generally accepted practice or rule which are adopted either by general agreement or consent which may be expressed or implied.
There are mainly four types of conventions of accounting
The first type is the Convention of Full Disclosure.
The second type is the Convention of Consistency.
The third type is the Convention of Prudence or conservation.
The fourth type is the Convention of Materiality.
The Short Descriptions of above-named conventions of accounting are as follows=
Convention of Full Disclosure is the rule due to which all organizations are bounded to disclose all those information which are essential for all the users as per the companies act 2013 rule passed by the government through the ministry of corporate affairs.
Convention of Consistency is the rule due to which all organizations are bounded to follow same accounting practices year after year but if any organization wants to do same to change it then it must disclose to all users who are interested in it publically either by press conferences which means by public meeting through various media channels or by disclosing in its website from the date of change bypassing the company's resolutions .
Convention of Conservatism is the rule due to which all organizations are bounded to record all losses if they occur such losses if in any year by passing accounting entry such as of provisions etc.
Convention of Materiality is the rule due to which all organizations are bounded to show only significant information in the financial statements and to the interested users.
That's all.
Thanks,
With Regards,
The AH Basic Company(Avinash Hasija)
