Accounting Conventions

Accounting Conventions:
The term 'conventions' includes those customs or traditions which guide the accountant while ommunicating the accounting information. The following are the important accounting conventions:
(i) Convention of conservatism (ii) Convention of full disclosure
(Hi) Convention of consistency (iv) Convention of materiality.
ACCOUNTING CONCEPTS
Separate Entity Concept:
Accounts are kept for entities, as distinguished from the persons who are associated with these ties. In recording events in accounting, the important question is: "How do these events affect the iy?" How they affect the persons who own, operate, or otherwise are associated with the entity is relevant. For example, when a person invests Rs. 200,000 into business it will be deemed that the owner has given that money to the business which will be shown as a 'liability' in the books of the business. In ok the owner withdraws Rs, 30,000 from the business, it will change the position and the net amount :jtyable by the business to the owner will be shown only as Rs. 170,000.
The concept of separate entity is applicable to all forms of business organizations. For example, in of a sole proprietorship or partnership business, though the, sole proprietor or partners are not as separate entities in the eyes of law, but for accounting purposes they will be considered as •qptrate entities.
Going Concern Concept:
According to this concept it is assumed that an entity is a going concern — that it will continue to aerate for an indefinite time period there is no intention to liquidate the particular business venture in the fcreseeable future. On account of this concept, the accountant while valuing the asset does not take into jcxHint the sale value of assets. Moreover, he charges depreciation on fixed assets on the basis of their
life rather than on their market values.
For example, suppose that a company has just purchased a three-year insurance policy for ^.-15000. If we assume that the business will continue in operation for three years or more. We will outsider the Rs.45000 cost of insurance as an asset which provides services to the business over a three-jar period. On the other hand, if we assume that the business is likely to terminate in the near future, the •surance poricy should be reported at its cancellation value i.e. the amount refundable upon cancellation.
Moreover, the concept applies to the business as a whole. When an enterprise liquidates a branch segment of its operations, the ability of the enterprise to continue as a going-concern is not impaired jaBnnally. The' enterprise wilVnot be considered as a going-concern when it has gone into liquidation.
Money Measurement Concept:
In financial accounting, a record is made only of those information that can be expressed in »:neiary terms. In other words, no accounting is possible for an event or transaction which is not j Measurable in terms of money, e.g. passing an examination, delivering lecture in a meeting, winning a prize sl These are events no doubt, but since these are not measurable in terms of money, there is no question of accounting.
Measurement of business events in money helps in understanding the state of affairs of business in ;h better way. For example. If a business owns, 1 500 kg of stock, one car, 1 500 square feet of building etc. these amounts cannot be added to produce a meaningful total of what the business owns. :ver, if a these items are expressed in monetary terms such as stock Rs.24000, car Rs. 300,000 and ig Rs. 500,000, all such items can be added in better way and precise estimate about the assets of ss will be available.