Part 3: Accounting Conventions and Principles

Accounting conventions represent the principles, assumptions, and rules that guide an accountant as he or she analyzes the effects of business events on the accounting cycle and applies them to various cycle procedures. Part 3 of the assessment requires you to determine which of these conventions apply to a given business scenario to enhance your understanding of the foundation of accounting procedures and processes.

Using Part 3 of the Assessment 1 Template, identify the applicable accounting convention for each of the following business scenarios. More than one convention may apply to each scenario. Explain your choices for each scenario.

Before completing the scenarios consider and describe what role ethics has throughout the accounting process and reporting to internal and external customers. Throughout your assessments ensure that you apply ethics to your decision making and reporting.

• Scenario 3:Bozrah Industries, a small independent retailer, wants to change its accounting system from cash-based to accrual-based, and is concerned about how this change will affect the recording of sales and expenses.

• Scenario 4:Randolph, Inc., has experienced major turnover in its accounting department, and the new head of accounting has been going through the current records of transactions. A couple of those transactions appear problematic. The first contains an error of $10,000 that the previous accountant decided was not large enough to adjust before the financial statements were prepared. This error would understate income and make the company look more profitable than it actually is.