Although to a layman, both accounting concepts and accounting conventions may sound similar, there are some fundamental differences between them.
When it comes to keeping track of your finances, there are a few different schools of thought. 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
- A concept is a theoretical idea that forms a collection of practices, whereas a convention refers to a method or procedure that is recognised by general agreement.
- Contrary to popular belief, accounting conventions are not derived from accounting concepts; rather, accounting concepts are derived from accounting conventions.
- There is no internal inconsistency with regard to accounting ideas, however, there is internal inconsistency with regard to accounting conventions.
- The incorporation of accounting principles does not involve the use of individual discretion in any way. However, when it comes to accounting standards, one’s own discretion may be a very important factor.
- The law is responsible for establishing accounting principles, whereas common accounting practices are responsible for establishing accounting conventions.
- The use of accounting ideas is consistent across all the different organisations, but the application of accounting rules is not guaranteed to be consistent.