Accounting Convention
What Is an Accounting Convention?
Accounting conventions are guidelines used to help companies determine how to
record certain business transactions that have not yet been fully addressed
by accounting standards. These procedures and principles are not legally binding but
are generally accepted by accounting bodies. Basically, they are designed to promote
consistency and help accountants overcome practical problems that can arise when
preparing financial statements.
KEY TAKEAWAYS
• Accounting conventions are guidelines used to help companies determine
how to record business transactions not yet fully covered by accounting
standards.
• They are generally accepted by accounting bodies but are not legally
binding.
• If an oversight organization sets forth a guideline that addresses the same
topic as the accounting convention, the accounting convention is no
longer applicable.
• There are four widely recognized accounting conventions: conservatism,
