Which of the following practices is not in consonance with the convention of conservatism?
A)Creating Provision for Bad debts
B)Creating Provision for Discount on Creditors
C)Creating Provision for Discount on Debtors
D)Creating Provision for tax

Question

Quizplus · Accepted Answer

Creating Provision for Discount on Creditors does not align with the convention of conservatism. This principle advises recognizing expenses and liabilities as soon as possible when there is uncertainty about the outcome, but only recognizing revenues and assets when they are assured of being received. Creating a provision for discount on creditors implies anticipating a gain by reducing liabilities, which contradicts the conservative approach of not recognizing anticipated gains.

Which of the Following Practices Is Not in Consonance with the Convention