What is the Difference Between Accounting Concepts and Conventions?

The difference between accounting concepts and conventions lies in their purpose, origin, and the level of freedom in their application. Here are the key differences between the two:

1. Purpose: Accounting concepts are fundamental principles and assumptions that underlie the recording and maintenance of financial transactions, while accounting conventions are established practices and procedures that are commonly accepted for the presentation and disclosure of financial transactions.
2. Origin: Accounting concepts are based on logic, reason, and economic reality, while accounting conventions are based on tradition, custom, and practicality.
3. Application: Accounting concepts are mandatory to follow and apply universally to all entities, whereas accounting conventions are optional and may vary depending on the country or region.
4. Biasness: Accounting concepts are objective, based on evidence, and free of biases, while accounting conventions are subjective, based on judgment, and may be influenced by personal judgment.
5. Consistency: Accounting concepts are consistent and stable over time, while accounting conventions may change over time with changes in accounting standards and regulations.
6. Disclosure: Accounting concepts are disclosed in the financial statements, while accounting conventions may not be disclosed.
7. Focus: Accounting concepts focus on determining the financial position and performance of an entity, while accounting conventions focus on presenting financial statements in a manner that is easy to understand and compare.

In summary, accounting concepts provide the foundation for recording and maintaining financial transactions, while accounting conventions are guidelines for presenting and disclosing financial information in a consistent and transparent manner.

Comparative Table: Accounting Concepts vs Conventions

Here is a table comparing the differences between accounting concepts and accounting conventions:

Some key differences between accounting concepts and conventions include:

• Accounting concepts are fundamental assumptions of accounting principles, while accounting conventions are the consistent use of these principles for the long run.
• Accounting concepts are set by accounting bodies, whereas conventions emerge from standard common accounting practices and are accepted by general agreement.
• Accounting concepts are free from biases and personal judgments, whereas accounting conventions may have a high possibility of biases.
• Accounting concepts are used to determine the financial position and performance of a business entity, while accounting conventions are used to present the financial statements in a manner that is easy to understand and compare.