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A1 - Accounting Concepts and Conventions There are some important concepts which are taken for granted in preparing accounts. A statement of accounting practice (SSAP 2 Disclosure of accounting Policies) describes 5 concepts as fundamental accounting concepts: they are;> Prudence> Accruals> Going Concern> Consistency> Materiality The Prudence Concept: Very often an accountant has to make a choice as to which figure he will take for a given item. The Prudence concept means that normally he will take the figure which will understate rather than overstate the profit. Alternatively, this could be expressed as choosing the figure which will cause the capital of the firm to be shown at a lower amount rather than at a higher one. This could be said to be to make sure that all losses are recorded in the books, but that profits should not be anticipated by recording prematurely. For example, cookers of Hotpoint are stated in their...

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