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Accounting Conventions
(1) Relevance
The convention of relevance
emphasizes the fact that only such information should be made available by
accounting as is relevant and useful for achieving its objectives. For example,
business is interested in knowing as to what has been total labor cost? It is
not interested in knowing how much employees spend and what they
save.
(2) Objectivity
The convention of objectivity
emphasizes that accounting information should be measured and expressed by the
standards which are commonly acceptable. For example, stock of goods lying
unsold at the end of the year should be valued as its cost price not at a higher
price even if it is likely to be sold at higher price in future. Reason is that
no one can be sure about the price which will prevail in future.
(3) Feasibility
The convention of feasibility
emphasizes that the time, labor and cost of analyzing accounting information
should be compared vis-à-vis benefit arising out of it. For example, the cost of
'oiling and greasing' the machinery is so small that its break-up per unit
produced will be meaningless and will amount to wastage of labor and time of the
accounting staff.
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