The principle of conservatism is concerned with
A)the avoidance of overstating assets or income in the preparation of financial statements.
B)the minimization of costs associated with providing financial information.
C)the company's ability to carry out its existing commitments.
D)the company's procedures for recording activities at their initial exchange price.

Question

Quizplus · Accepted Answer

The principle of conservatism, also known as the principle of prudence, requires that when preparing financial statements, accountants should avoid overstating assets or income, but should be more cautious about recognizing losses or liabilities. This is to ensure that financial statements provide a reasonable representation of a company's financial position and performance.

The Principle of Conservatism Is Concerned with