Question

Identify and describe the ‘conventions’ accountants are allowed to useto make computing depreciation and amortization simpler.(this is a materiality construct)

Answer 1

An Accountant needs to follow the standards set & the guidelines issued by the accounting standard board.

If there is no specific guideline or rule or standard for treatment of a particular item, then the accountant will use conventions.

Conventions are those common practices used as a guideline when recording a business transactions.

Conventions Accountants are allowed to use while computation of deprecition & amortisation are:

• Estimation of useful life for a finite period.
• Estimation of Salvage value at the end of the useful life for tangiable assets.
• Selection of Method of depreciation & amortisation

For all of the above conventions there is no specific guidelines. so, the accountant can make use any of that with a reasonable & reliable estimate.