His searches found close topublications with the word "fuzzy" in their titles, but perhaps there are evenHe states that despite the fact that most of the concepts have been universally accepted, accountants quite often come across situations where two concepts are in onflict and one overrides the application of the other.
Solution to the clash between historical cost concept and Prudence convention Williamson states that prudence should prevail over the historical cost concept. No enterprise can prepare its financial statements without considering these concepts.
If an accounting regulatory body sets forth a guideline that addresses the same topic as the accounting convention, the accounting convention will no longer be applicable.
Advanced corporate reporting This is an elective module. Information based on historical cost may not be useful to its members.
Because the business is assumed to be a going concern it is possible to carry forward the cost of the unsold units as a charge against profits of the next period. Ackermann and Nicholas Rescher respectively. This means he should try to strip his answers of any personal opinion or prejudice and should be as precise and as detailed as the situation warrants.
This means that we can value stock at current market rates, but only if the selling price is lower than the cost. They intended to apply the idea to empirical research.
This does not mean that a firm cannot change the accounting methods according to the changed circumstances of the business. This is done to follow which of the following accounting principles: Only items material in amount or in their nature will affect the true and fair view given by a set of accounts.
If the firm intends to sell them later, it is likely to make a profit on the sale. Solution to the clash between accruals and prudence When there is a clash between the two, prudence prevails.
If every accountant starts following his own norms and notions for accounting of different items then there will be an utter confusion.
Similarly, if the two unsold units were now unlikely to be sold at more than their cost of? This shows the application of the prudence concept.American Accounting Association Basic Page. Academic Accounting Access FASB Accounting Standards Codification™ GASB Governmental Accounting.
To support the application of the "true and fair view", accounting has adopted certain concepts and conventions which help to ensure that accounting information is presented accurately and consistently. To support the application of the "true and fair view", accounting has adopted certain concepts and conventions which help to ensure that accounting information is presented accurately and consistently.
Accounting Conventions. The most commonly encountered convention is the "historical cost convention". This paper gives a critical review of 25 years of critical accounting research on gender, addressing what we have learned to date and what are the most challenging areas to be investigated in the future.
Clash between the historical cost concept and Prudence convention 9 QUESTION THREE: Solutions to the clashing accounting concepts and conventions 11 REFERENCES 13 show more content iii) The entity concept: The concept is that accountants regard a business as a separate entity, distinct from its owners or managers.
As customs change, so to will accounting conventions. Basically, conventions fill in the gaps between guidelines and practical usage. If an accounting regulatory body sets forth a guideline that addresses the same topic as the accounting convention, the accounting convention will no longer be applicable.
Concepts supersede conventions.Download