Difference Between Accounting Concept and Accounting Convention (With Table)

Accounting has a central place to occupy whether it is a common home, government, or a business enterprise especially. Accounting ensures the prevention of fraud, illegal practices and traces the losses well. Accounting concepts and accounting conventions are two types of accounting principles based on which accounting happens. 

Accounting Concept vs Accounting Convention

The main difference between accounting concept and accounting convention is that accounting concepts are legally compulsory in the process of recording transactions and maintaining books of accounts, whereas accounting conventions are non-binding principles used in making financial statements.

Difference Between Accounting Concept and Accounting Convention

Accounting concepts are the assumptions that provide the basis for accounting the transactions. Scope of personal values or bias is absent in the case of accounting concepts. In all businesses, the very same accounting concepts are applied.

Accounting conventions are guidelines that accountants adhere to due to standard practice or consensus. These are not used uniformly in all the enterprises and hence, are open to personal values or bias.

Comparison Table Between Accounting Concept and Accounting Convention

Parameters of ComparisonAccounting ConceptAccounting Convention
Legal statusAccounting concepts are legally backed, hence, are compulsory to be applied formally Accounting conventions are unwritten informal methods, hence, not obliged by governing bodies to be followed
Uniformity Uniform accounting concepts are applied all across the business enterprisesUniformity lacks accounting conventions across enterprises as these are used differently by different enterprises.
Usage Accounting principles are used to keep track of records and balance books.Accounting conventions are employed while inferencing financial statements from the given recorded transactions like profit and loss account, balance sheet, income statement 
Mutual reliabilityWhile applying accounting concepts, accounting conventions are not needed at allAccounting concepts are a primary material for applying accounting conventions 
SignificanceAccounting concepts are more important accounting principles than accounting conventionsAccounting standards are, however, not as significant as accounting concepts.
Personal biasNo scope exists for personal bias or values while employing accounting conceptsAccounting conventions are open to personal bias or values
ExamplesBusiness entity concept, money measurement concept, going concern concept, realization concept, dual concept, accounting period concept, cost conceptFull disclosure, consistency, materiality, conservatism

What is Accounting Concept?

Accounting concepts are accounting principles providing the basis for all the transactions to be recorded and keeping books of accounts. These have legal acceptance standardized by the governing accounting bodies and law. These are well-written and well-recognized formal concepts which are compulsory to be used while accounting.

Because of the formal-legal backing and standardization by accounting bodies, accounting concepts are of uniform nature and are applied uniformly across all the business enterprises. No difference exists in the accounting concepts of one business enterprise when compared with other enterprises. For example, the accounting concept of the dual concept, which characterizes transactions of having a dual aspect of credit and liability or payer and payee, is found uniformly in all business enterprises.

Independent on accounting conventions, accounting concepts are not being used in accordance with generally recognised accounting practices. Therefore, accounting concepts are more significant than accounting conventions. Moreover, there is no scope for personal bias as accounting concepts are legally-backed-standardized-formal rules.

What is Accounting Convention?

Accounting conventions are accounting principles having no legal obligation to be applied while accounting. Accounting norms have evolved over time and have established a standard in the accounting industry. These conventions were developed to handle the changes emerging in the landscape of financial reporting. These are used because of the mutual consensus among the accountants with no formal-legal backing.

The nature of accounting conventions is inferential which needs accounting concepts to be applied on the first basis for accounting conventions to be applied. Accounting conventions do not exist in a vacuum, separate from accounting ideas. As a result, accounting standards have given way to accounting concepts.

There lies no uniformity while applying accounting conventions across business enterprises. The accounting convention of full disclosure, for instance, calls for providing important information to the shareholders of the enterprise. However, which information is important and which is not is different for different accountants. Therefore, there is a huge scope of personal bias or judgment when applying accounting conventions.

Accounting conventions are used while giving financial statements, in preparing a balance sheet, profit and loss account, income statement, and position statement. Moreover, there exist four accounting conventions in the accounting world which are full disclosure, consistency, materiality, and conservatism.

Main Differences Between Accounting Concept and Accounting Convention

  1. Accounting concepts are legally obliged-standardized-formally written accounting principles. On the other hand, accounting conventions are non-legal-informal accounting principles that are applied due to the custom and consensus among the accountants.
  2. Accounting concepts exist independent of the accounting conventions whereas accounting conventions are needed to be applied in the view of accounting concepts. Therefore, accounting concepts are more significant than accounting conventions.
  3. Accounting concepts are employed uniformly across all business enterprises. However, the application of accounting conventions is different in different enterprises.
  4. There exists no scope for the intrusion of personal bias or judgment on the part of accountants while using the accounting concepts. However, the application of accounting conventions is open to individual preferences.
  5. Accounting concepts are used while recording transactions and keeping account books and accounting conventions are used in making financial statements, balance sheets, income statements, etc. 


To sum up, accounting concepts and accounting conventions may appear to be somewhat the same principles of accounting but there lies a huge difference. Both are different in their area of usage, legal position, uniformity in usage, mutual reliability, and personal bias scope. Therefore, learning the differences between them becomes of utmost importance while accounting.


  1. https://www.sciencedirect.com/science/article/abs/pii/S0361368200000209
  2. https://www.jstor.org/stable/241244