Question

In each of the following scenarios, identify the accounting conventional rule that applies.
1. The company’s vehicles, which would only have a small scrap value if the company goes into liquidation.

2. The proprietor who has supplied the business capital out of his own private bank account.

3. Electricity consumed in period 1 and paid for in period 2.

4. The proprietor who argues that the accountant has got a motor vehicle entered twice in the books of account.

5. Equipment originally purchased for GHS 500,000 which would now cost GHS 555,000.

6. A company agrees to a five-year construction contract.

7. A demand by the company’s chairman to include every detailed transaction in the presentation of the annual accounts.

8. A company borrowed $100,000 in December and will make its only payment for interest when the note comes due six months later. The total interest for the six months will be $3,600. On the December income statement, the accountant reported interest expense of $600.

9. A retailer wishes to report its merchandise inventory on its balance sheet at its retail value.

10. Near the end of the current year, a company required a customer to pay $200,000 as a deposit for work that is to begin in the following year. At the end of the current year the company reported the $200,000 as a liability on its balance sheet.

11. The creative chief executive of a corporation who is personally responsible for numerous inventions and innovations is not reported as an asset on the corporation's balance sheet.

12. A company sold merchandise of $8,000 to a customer in December. The company's sales terms require the customer to pay the company in 30 days. The company's income statement reported the sale in December.

13. A corporation pays its annual property tax bill of approximately $12,000 in one payment each December 28. During the year, the corporation's monthly income statements report Property Tax Expense of $1,000.

14. A large company purchases a $250 digital camera and expenses it immediately instead of recording it as an asset and depreciating it over its useful life.

15. Accountants might recognize losses but not gains in certain situations. For example, the company might write-down the cost of inventory, but will not write-up the cost of inventory.

Answer 1

The accounting convention has four aspects as Disclosure,Consistency , Conservatism and materiality.

Number	Convention
1	Convention of materiality
2	Convention of Disclosure
3	Convention of Consistency
4	Convention of Conservatism
5	Convention of Conservatism
6	Convention of Consistency
7	Convention of Disclosure
8	Convention of Disclosure
9	Convention of Conservatism
10	Convention of Consistency
11	Convention of Disclosure
12	Convention of Conservatism
13	Convention of Disclosure
14	Convention of Consistency
15	Convention of Conservatism