An accounting convention is a practice generally followed by all accountants as a result of custom, although changing norms in the accounting and financial industries result in periodic updates to them.
ACCOUNTING CONVENTIONS AND STANDARDS. Accounting conventions (or assumptions) are the basic rules of accounting which have become acceptable procedures over time. They are the basic rules of accounting. Accounting standards are laws for members of the professional bodies to follow. The historical cost convention is a rule which states that all transactions are recorded at their original value, and adjustments are not made for inflation. This means that assets are not valued at what they could be sold for at the present time. Top 10 facts about the world. An accounting convention is a practice generally followed by all accountants as a result of custom, although changing norms in the accounting and financial industries result in periodic updates to them. Also known as accounting concepts, they are the groundwork of accounting. One of the key accounting conventions is consistency. Once accountants adopt an accounting method they feel is appropriate to a client or setting, they continue to use it. This eliminates confusion and situations where accounting is unclear as a result of changing accounting methods. The accounting entity convention is the basic principle that the personal transactions of the owner(s) should be kept separate from those of the business. The business is always viewed as a separate entity, regardless of whether the firm is a sole trader, a partnership or a company. The historical cost convention is a rule which states that all transactions are recorded at their original value, and adjustments are not made for inflation. This means that assets are not valued at what they could be sold for at the present time. An accounting convention is not a legally-binding practice; rather, it is a generally-accepted convention based on customs, and is designed to help accountants overcome practical problems that arise out of the preparation of financial statements. As customs change, so to will accounting conventions. If an oversight organization, such as the Securities and Exchange Commission (SEC) or the Financial Accounting Standards Board (FASB) set forth a guideline that addresses the same topic as the accounting convention, the accounting convention will no longer be applicable. accounting convention. A method or procedure that is based on custom and is subject to change as developments arise and can be outdated by the SEC's Accounting Series Release (ASR). URL to this page: http://www.investorwords.com/15735/accounting_convention.html. Copyright © 2015 by WebFinance, Inc. ALL RIGHTS RESERVED. Reproduction of all or part of this glossary, in any format, without the written consent of WebFinance, Inc. is prohibited. Convention of Disclosure : The disclosure of all significant information is one of the important accounting conventions. It implies that accounts should be prepared in such a way that all material information is clearly disclosed to the reader. Explain important accounting conventions. The term conventions includes those customs or traditions which guide the accountants while preparing the accounting statements. The following are How it works/Example: There are four widely recognized accounting conventions that guide accountants: 1. Be conservative. In other words, play it safe. 2. Disclose in full. 3. Be consistent. In other words, use the same method for calculating and reporting similar events. 4. Report everything that is important. This is also known as the materiality convention. In other words, an item or event is material (and thus should be disclosed) if knowledge of the event or item might reasonably influence the users of the financial statements. BREAKING DOWN 'Accounting Convention'. If an oversight organization, such as the Securities and Exchange Commission (SEC) or the Financial Accounting Standards Board (FASB) set forth a guideline that addresses the same topic as the accounting convention, the accounting convention will no longer be applicable. Best Answer: Accounting conventions are called the pillars over the building of accounting is standing. There are four accounting conventions that are: 1. convention of disclosure 2. convention of materiality 3. convention of conservatism 4. convention of consistency. Source(s): ICMAP website www.icmap.com.pk. 
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what is an accounting convention