Accounting Convention

What is an 'Accounting Convention'

An accounting convention consists of the guidelines that arise from the practical application of accounting principles. An accounting convention is not a legally-binding practice; rather, it is a generally-accepted convention based on customs, and is designed to help accountants overcome practical problems that arise out of the preparation of financial statements. As customs change, so to will accounting conventions.

BREAKING DOWN 'Accounting Convention'

If an oversight organization, such as the Securities and Exchange Commission (SEC) or the Financial Accounting Standards Board (FASB) set forth a guideline that addresses the same topic as the accounting convention, the accounting convention will no longer be applicable. Basically, conventions fill in the gaps between guidelines and practical usage.

RELATED TERMS
  1. Bank Discount Basis

    A quoting convention used by financial institutions when quoting ...
  2. Convention Statement

    A document filed by an insurance or reinsurance company that ...
  3. Accounting Practice

    The routine manner in which the day-to-day financial activities ...
  4. Conventional Mortgage

    A type of mortgage in which the underlying terms and conditions ...
  5. Predators' Ball

    An annual convention held by Drexel Burnham Lambert for the purpose ...
  6. Accounting Standard

    A principle that guides and standardizes accounting practices. ...
Related Articles
  1. Economics

    What are Accounting Principles?

    The term accounting principles refers to rules and guidelines companies use to help them record their business and financial transactions.
  2. Investing News

    What if Republicans Hold a Brokered Convention?

    History shows anything can happen once the second – or 36th – ballot is cast, from a win for the front-runner to a nomination for the zero-delegate.
  3. Options & Futures

    The Cost of Shale Oil Versus Conventional Oil

    Fracking technology has brought new costs to the oil extraction process, and that has an impact on the profitability of the deposits being drilled.
  4. Professionals

    Accounting Research Manager: Job Description & Average Salary

    Learn about the average salary of an accounting research manager as well as the necessary skills, experience and education, and licenses to hold this position.
  5. Forex Education

    Accounting Basics: Financial Reporting

    By Bob Schneider Generally Accepted Accounting Principles (GAAP)A key prerequisite for meaningful financial statements is that they be comparable to those for other companies, especially firms ...
  6. Savings

    Why Organic Food Is So Expensive

    Discover how organic farmers face many obstacles. Learn why your organics cost so much more than conventional foods and if there is any hope for falling prices.
  7. Forex Education

    Accounting Basics: Branches Of Accounting

    By Bob Schneider Accounting can be divided into several areas of activity. These can certainly overlap and they are often closely intertwined. But it's still useful to distinguish them, not ...
  8. Active Trading Fundamentals

    Behavioral Finance: Introduction

    By Albert PhungAccording to conventional financial theory, the world and its participants are, for the most part, rational "wealth maximizers". However, there are many instances where emotion ...
  9. Investing Basics

    What Is A Trading Account?

    A trading account enables an investor to buy and sell securities.
  10. Mutual Funds & ETFs

    Picking Top-Quality Hedge Funds

    Narrowing down your choices is the first step to finding a winning fund.
RELATED FAQS
  1. How does proration affect asset depreciation?

    Learn how different proration or applicable convention methods such as half-year, mid-quarter and mid-month affect asset ... Read Answer >>
  2. If different bond markets use different day-count conventions, how do I know which ...

    A day-count convention is a system used in the bond markets to determine the number of days between two coupon dates. This ... Read Answer >>
  3. Who sets the guidelines for accounting principles?

    Understand the generally accepted accounting principles and why they were put in place. Learn what entity sets the guidelines ... Read Answer >>
  4. What are the differences between a change in accounting principle and a change in ...

    Learn how to differentiate between a change in accounting principle and a change in accounting estimate and how accountants ... Read Answer >>
  5. How does financial accounting help decision making?

    Read a brief overview of some areas where financial accounting helps in decision making for investors, lending institutions ... Read Answer >>
  6. When and why were GAAP first established?

    Take a deeper look into the development and purpose of the generally accepted accounting principles, also known as GAAP, ... Read Answer >>
Hot Definitions
  1. Physical Capital

    Physical capital is one of the three main factors of production in economic theory. It consists of manmade goods that assist ...
  2. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  3. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  4. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  5. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  6. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
Trading Center