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HSM 340 Accounting Conventions and Methods Discussions 1 Week 2
Discuss the accounting conventions that affect the application of accounting principles. Materiality allows treatment in accordance to GAAP (Generally Accepted Accounting Principles). More than that, it has a certain significance because it makes it necessary for material expenses   to be booked in the appropriate time period. What happens if it is not and why not? Historical cost convention is one important factor. If an asset is purchased 5 years ago and recorded at cost, it must be kept recorded at cost in the books. The reason why costs are not updated and changed to market value is the fact that assets fluctuate in value. Do you agree with the cost concept or are there suggestions to treat it differently?