The Accounting Conservatism Principle Essay
1. Convention of Conservatism. One of the most important accounting conventions that accountants apply in the industry is the principle of conservatism. This principle suggests that if two values are associated with a specific transaction, the lower should be reported on the asset or income side of the financial statement. The genealogy of conservatism goes back from antiquity to the century. overview of important works on accounting history and notable articles on. Accounting conservatism reveals that the seeds of. The accounting equation relates the three concepts in the following way: Assets Liabilities, Owner's Equity. Financial statements of a company reflect the formal activities of such an institution related to finance. There are four such statements: the balance sheet, the profit and loss account, the cash flow statement, and the main topic of our research article is a study of economic effects in the scientific discipline of accounting. We will talk about an accounting rule and thus look at the effects this rule has on certain economic events. The subtopic of our article is a further investigation of the well-known rule of accounting conservatism. View the PDF. We study the information consequences of conservatism in accounting. Previous research shows that information asymmetries in capital markets lead to an increase in conservatism at the firm level. In this article, we further argue that an increase in conservatism improves the business information environment and leads to subsequent, JOURNAL OF Accounting amp Economids ELSEVIER Journal of Accounting and, 1997, The conservatism principle and the asymmetric timeliness of Sudipta Basu Department of Accountancy, Baruch College , CUNY, Avenue, New York, USA, Received, ~ The best known of these principles are as follows: Accrual principle. This is the concept that accounting transactions should be recorded in the accounting periods in which they actually occur, and not in the periods in which cash flows are associated with them. This is the basis of accrual accounting.