Differences Between Accounting Concepts and Conventions

Although to a layman, both accounting concepts and accounting conventions may sound similar, there are some fundamental differences between them.

There are a few different schools of thought when it comes to keeping track of your finances. Some people prefer to follow accounting concepts, while others prefer conventions. What’s the difference between the two?

Basically, accounting concepts are the ideas behind the rules of accounting. They provide a framework for how financial transactions should be recorded and reported. Conventions, on the other hand, are the actual rules that accounting standards boards have established.

There are a few key differences between accounting concepts and conventions. For one, accounting concepts are more general in nature, while conventions are more specific.

Accounting Concepts vs. Accounting Conventions

Accounting concepts and conventions are the foundation of financial accounting. Accounting concepts are the fundamental assumptions and principles that govern the preparation of financial statements. Accounting conventions are the specific rules and procedures that are used to implement accounting concepts.

Here are some of the key differences between accounting concepts and conventions:

• Accounting concepts are more general, while accounting conventions are more specific. Accounting concepts are broad statements about the nature of accounting and the underlying assumptions that are made. For example, the business entity concept states that a business is a separate entity from its owners. Accounting conventions are more specific rules and procedures that are used to implement accounting concepts. For example, the accrual basis of accounting states that revenues and expenses should be recorded when they are incurred, not when cash is received or paid.
• Accounting concepts are more theoretical, while accounting conventions are more practical. Accounting concepts are based on economic theory and are intended to provide a fair and accurate representation of the financial position and performance of a company. Accounting conventions are more practical and are intended to make the preparation of financial statements efficient and easy to understand.
• Accounting concepts are less likely to change, while accounting conventions are more likely to change. Accounting concepts are based on fundamental principles that are unlikely to change over time. Accounting conventions, on the other hand, are more likely to change as new accounting standards are developed and as the business environment changes.
• Accounting concepts are more important for understanding the financial statements, while accounting conventions are more important for preparing the financial statements. Accounting concepts provide the framework for understanding the financial statements. Accounting conventions are the tools that are used to prepare the financial statements in accordance with the accounting concepts.

In general, accounting concepts are more important than accounting conventions. However, both concepts and conventions are important for ensuring that financial statements are prepared in a fair and accurate manner.