Accounting Conventions

Complete each of the sentences below by filling it with the correct accounting

convention/ doctrine.

1. The assumption that the life of a business continues well into the future is the Going Concern Concept. 

convention.

2. To record a non-current asset such as land at its cost rather than what it is now worth is

applying the Historical Cost convention.

3. To understate profit, rather than overstate it, is the doctrine of Prudence.

4. A Monetary value must be given to a transaction for it to be recorded in the books

of business.

5. The Accounting period convention states that the life of the business should be

broken down into equal time periods of at least one year.

6. This accounting convention separates the business from the owner. The accounting entity concept. 

7. The doctrine of Materiality states that the accounting reports should contain all

relevant information to ensure the owner to understand the financial position of the

business.

8. The accounting reports often reflect the doctrine of Materiality, where a large

business may report in hundreds, thousands or millions of dollars, whereas a small

business may report in exact dollars and cents.

9. If the doctrine of the Historical Cost Convention/Prudence is not followed then significant variances or differences may appear to have occurred which in fact did not happen.