Accounting Convention

Accounting conventions are commonly used in preparing financial statements. It is an agreed-upon way to record certain transactions on financial statements which are helpful when new issues arise that are not covered by accounting standards, such as the official, established regulations set by governing bodies.

Accounting conventions are generally not legally binding. But, they help address issues when standard or rule are not yet a set. New accounting standards are created when  regulatory groups address gaps in existing practices to replace existing accounting conventions. However, consistency among companies within the same industry can be ensured by using accounting conventions as stopgap measures. 

An accounting software is used by companies to ensure that they follow conventions and remain compliant with Generally Accepted Accounting  Principles (GAAP). It can also help save considerable time of organizations by streamlining and organizing transactions. 

Conservatism, Consistency, Full disclosure and Materiality are four accounting conventions recognized by financial professionals across all industries.

Providing consistency, Boosting credibility and Creating accuracy are some of the benefits of accounting conventions. An accountant can reduce the hassle and save time when unusual recording or reporting situations creates by following accounting conventions.

Accounting conventions are a set of implied rules that are followed by accountants to ensure consistency since it help dictate how to record transactions on financial statements which aren't addressed by accounting standards..