Difference Between Accounting Concepts And Conventions And Matching concept

By:Bhawna DhamijaMBA 1 ARoll No. : 24

Accounting Concepts

Accounting concepts may be defined as the basic assumptions or conditions upon which the science of accounting is based.. Accounting concepts are certain rules of general application. They are basic to the subject of accounting and provide guidelines in selecting accounting methods in certain situations. Its object is to make accounting uniform, objective and understandable.

Accounting Conventions

These emerge out of accounting practices, adopted by various organization over a period of time. These include those customs and traditions which guide the accountants while preparing the accounting statements. These are derived out of usage and practices and do not have universal application.

BASIS ACCOUNTING CONCEPTS ACCOUNTING CONVENTIONS

Nature Accounting concepts aregenerally agreed principlefollowed by accountant.

Accounting conventions have no general applicability. These are flexible, optional and provides several alternative practice.

Established By Law Guidelines based upon customs or usage

Biasness No space for personal biasness in the adoption . It has uniform adoption.

Biasness in adoption. It has no uniform adoption.

Use These are primarily used inrecording, classifying, analyzing and communicating financial information of a business.

These are primarily used forpreparing financial statements

Mandatory byregulating agency

Accounting concepts are mademandatory in a specificaccounting standard enforcedby a regulating agency.

Conventions are not mandatory to be enforced by any regulating agency.

Examples of accounting concept:Separate Entity Concept , Money measurement

concept……

Examples of accounting convention:Convention of full disclosure, conservatism ,

consistency , materiality…..

To summarize , accounting concepts are assumptions or fundamental proposition on which accounting depends and conventions are traditions or customs that guide in preparing accounting statements.

Matching ConceptWhat to match?Expense is to be matched with revenue.When to match?Either at the end of the life of business or at the

end of each year.How to measure revenue and expense?Measurement of Revenue - Revenue is measured according to accrual

concept. - Revenue is considered to be earned on its being

realised.

Measurement of Expense - Period of recognition (expense being directly

or indirectly associated with revenue of that period)

- Determination of amount of expense (traditional approach and replacement approach )

Any Questions??