Accouting Conventions

Relevance

Relevant information is capable of making a difference in the decisions made by users.

Faithful representation

A depiction that is complete, neutral, and free from error.

Materiality

An entity-specific aspect of relevance based on the nature or magnitude of the items to which the information relates.

Comparability

The ability to compare between entities and over time to understand similarities and differences.

Verifiability

Assures users that information faithfully represents the economic phenomena it purports to represent.

Understandability

Presenting information clearly and concisely to assist users.

Timeliness

Information must be relevant within an appropriate timeframe to be useful for decision making.

Cost constraints

The importance of justifying the costs of reporting financial information against the benefits derived.

Consistency

The use of the same methods for the same items either from period to period within an entity or across entities.

Accounting

The process of identifying, measuring, interpreting, and communicating financial information to aid decision making.

Duality

The concept that total assets equal total equities, indicating every transaction has two impacts.

Monetary convention

Money as the medium of exchange used in transactions.

Entity convention

The assumption that a business is separate from its owners.

Going concern

The assumption that a business will continue its operations indefinitely.

Historical cost

The assumption that business transactions are recorded based on their cost at the time of the transaction.

Prudence

A conservative approach to recording financial information to avoid overstating the financial position.

Legal Entity

The concept that a company is separate and distinct from its owner, meaning the company's debts are not the owner's debts.