2021 · Q47
What is the underlying accounting concept that supports no anticipation of profits but provision for all possible losses?
General Accounting Principles, Auditing and InsuranceAccounting concepts and conventions
- AMatching
- BMateriality
- CConsistency
- DConservatism
Explanation
The conservatism principle requires that accountants and financial managers should be cautious in their approach to recognizing and reporting financial transactions. It emphasizes that companies should be conservative in their assessment of their financial position and should not anticipate profits until they are realized.