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Explain a)Convention of Conservation b)Convention of Materiality c) Convention of Consistency
a)Convention of Conservation
This accounting convention is generally expressed as to “anticipate all the future losses and expenses, without considering the future incomes and profits unless they are actually realized.” This concept emphasizes that profits should never be overstated or anticipated. This convention generally applies to the valuation of current assets as they are valued at cost or market price whichever is lower.
b)Convention of Materiality
This accounting convention proposed that while accounting only those transactions will be considered which have material impact on financial status of the organization and other transactions which have insignificant effect will be ignored.. It gives relative importance to an item or event.
c) Convention of Consistency
This accounting convention proposes that the same accounting principles, procedures and policies should be used consistently on a period to period basis for preparing financial statements to facilitate comparison of financial statements on period to period basis. If any changes are made in the accounting procedures or policies, then it should be disclosed explicitly while preparing the financial statements.
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