Comparisons Wiki

Accounting Concept vs. Accounting Convention: Difference and Comparison

Edited by Muazma Batool — By Muneeza Rehman — Published on December 15, 2023
Accounting concepts are foundational theories guiding financial recording, while accounting conventions are customary practices followed by accountants to ensure consistency and comparability.
Accounting Concept vs. Accounting Convention

Difference Between Accounting Concept and Accounting Convention

Accounting concepts and accounting conventions, both integral to the world of finance, serve different functions. Accounting concepts refer to the basic theories and principles that underlie the art and science of accounting. These concepts act as the foundation upon which the complete structure of accounting is built. For instance, the accrual concept dictates that transactions are recorded when they occur, not when cash changes hands. Accounting conventions, on the other hand, are practices or methodologies that have become standard over time due to their widespread acceptance.
Muneeza Rehman
Dec 15, 2023
It's imperative to recognize that while accounting concepts are foundational, accounting conventions evolve over time. Concepts like the going concern concept assume that a business will continue its operations for the foreseeable future. In contrast, conventions might involve methods for depreciating assets or writing off bad debts, which can vary across organizations but still stay within accepted boundaries.
Muazma Batool
Dec 15, 2023
From a compliance standpoint, accounting concepts are more rigid as they form the bedrock of financial accounting and are often enshrined in accounting standards. Adhering to these concepts ensures that financial statements reflect the true and fair view of an organization's financial health. Accounting conventions, conversely, provide flexibility. They allow accountants to use their judgment and discretion, ensuring that financial statements are not only compliant but also meaningful to users.
Muneeza Rehman
Dec 15, 2023
In conclusion, both accounting concepts and accounting conventions play pivotal roles in the realm of accounting. While concepts provide the theoretical framework that ensures the integrity and reliability of financial statements, conventions offer the practical tools accountants need to interpret, adapt, and present financial information effectively.
Kaitlyn
Dec 15, 2023

Accounting Concept vs. Accounting Convention Comparison Chart

Definition

Fundamental theories of accounting
Customary practices followed for consistency
Muneeza Rehman
Dec 15, 2023

Flexibility

Rigid, as they are basic principles
Flexible, based on widespread acceptance
Muazma Batool
Dec 15, 2023

Origin

Rooted in accounting theories
Developed over time due to tradition
Muneeza Rehman
Dec 15, 2023

Role

Ensure integrity of financial recording
Ensure comparability across financial statements
Elijah
Dec 15, 2023

Examples

Accrual concept, going concern concept
Methods of depreciation, writing off bad debts
Muneeza Rehman
Dec 15, 2023

Accounting Concept vs. Accounting Convention Definitions

Accounting Concept

Ground rules of accounting.
The consistency accounting concept ensures similar treatment of similar items.
Muneeza Rehman
Sep 25, 2023

Accounting Convention

Established practices followed for uniformity in accounting.
The straight-line method, an accounting convention, is popular for asset depreciation.
Muneeza Rehman
Sep 25, 2023

Accounting Concept

Fundamental beliefs underpinning financial reporting.
Accrual accounting concept is integral for revenue recognition.
Muazma Batool
Sep 25, 2023

Accounting Convention

Practices that evolved from accountant consensus.
Materiality is an accounting convention allowing minor discrepancies to be disregarded.
Olivia
Sep 25, 2023

Accounting Concept

The backbone of financial record-keeping.
The realization accounting concept determines when revenue is recognized.
Lucas
Sep 25, 2023

Accounting Convention

Generally accepted financial reporting norms.
The consistency convention mandates that businesses use the same accounting methods over time.
Muneeza Rehman
Sep 25, 2023

Accounting Concept

Theoretical principles governing accounting practices.
The going concern is a fundamental accounting concept.
Muneeza Rehman
Sep 25, 2023

Accounting Convention

Traditionally accepted methodologies in finance.
Writing off doubtful debts is a common accounting convention.
Muazma Batool
Sep 25, 2023

Accounting Concept

Guiding pillars for accountants.
The matching accounting concept dictates matching revenues with expenses.
Jonathan
Sep 25, 2023

Accounting Convention

Customary methods ensuring consistent financial reporting.
The accounting convention of prudence ensures underestimation of income and overestimation of losses.
Muneeza Rehman
Sep 25, 2023

Accounting Concept vs. Accounting Convention Frequently Asked Questions

What underpins the entire structure of accounting?

Accounting concepts.
Muneeza Rehman
Dec 15, 2023

Which ensures that financial statements reflect a true and fair view?

Accounting concepts.
Muneeza Rehman
Dec 15, 2023

Are accounting conventions more flexible than accounting concepts?

Yes, accounting conventions provide flexibility based on tradition.
Muazma Batool
Dec 15, 2023

What allows for the use of judgment in financial reporting?

Accounting conventions.
Lucas
Dec 15, 2023

Is the going concern an accounting concept or convention?

Accounting concept.
William
Dec 15, 2023

Why are accounting conventions important for financial statements?

They ensure consistency and comparability.
Kaitlyn
Dec 15, 2023

Do accounting conventions change over time?

Yes, they evolve based on customary practices.
Kaitlyn
Dec 15, 2023

How do accounting concepts and conventions relate to each other?

Accounting concepts provide the foundational theories, while conventions offer practical tools for interpretation and presentation.
Jonathan
Dec 15, 2023

Which provides the theoretical framework for financial accounting?

Accounting concepts.
Muneeza Rehman
Dec 15, 2023

Which might determine the method of depreciating an asset?

Accounting convention.
Elijah
Dec 15, 2023

Content Creators

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Muneeza Rehman
At Comparisons.wiki, Muneeza skillfully navigates the vast sea of information, ensuring clarity and accuracy as the lead content editor. With a keen eye for detail, she curates every comparison to enlighten and engage readers.
Edited by
Muazma Batool
As a content editor, Muazma Batool is not just a grammar guru but a creative mastermind who breathes life into every word. With an eagle eye for detail and a passion for storytelling, she transforms bland text into engaging content that captivates audiences and drives results.

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