4. Convention or concepts used by the company.

i)

Entity concepts The business unit is treated as separate body, separate from owners. Sole proprietors, partnerships and companies are separates business entities which have existence separate from the owners. This distinction between the owners and the business could be fictional as in the case of sole proprietorships and partnerships, where the owners do not enjoy limited liability.

ii)

Prudence concepts This concept requires the enterprise to anticipate no profits until earned but to provide for all anticipated losses. Out of this concept has evolved the rule to value current assets at the lower of cost and net realizable value.

iii)

Going concern concept This concept states that a business firm will continue to carry on its activities for an indefinite period of time. Simply stated, it means that every business entity has continuity of life.