Under the conservatism principle, liabilities and expenses would be understated, rather than overstated.

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The conservatism principle states that uncertainties and risks should be accounted for by recognizing losses and expenses as soon as possible but revenues and gains should only be recognized when certain. This principle encourages understating assets and overstating liabilities and expenses, which ensures that the financial statements fairly represent the financial position and performance of the company. Therefore, under the conservatism principle, liabilities and expenses would be overstated, not understated.

Under the Conservatism Principle, Liabilities and Expenses Would Be Understated