The conservatism principle:
A)Requires that when there are more than one equally likely estimate of amounts expected to be received or paid in the future,then the less optimistic amount should be used
B)Requires that a company use the same accounting methods period after period
C)Requires that revenues and expenses be reported in the period in which they are earned or incurred
D)Requires that all items of a material nature be included in financial statements
E)Requires that all inventory items be reported at full cost

Question

Quizplus · Accepted Answer

The conservatism principle requires that when there are multiple estimates of amounts expected to be received or paid in the future that are equally likely, the less optimistic amount should be used. This principle aims to ensure that financial statements do not overstate assets or income and do not understate liabilities or expenses.

The Conservatism Principle