Application of the (prudence)conservatism assumption can produce:
A)higher profits.
B)higher values for assets.
C)higher amounts for liabilities.
D)lower amounts for expenses.

Question

Quizplus · Accepted Answer

The conservatism (or prudence) assumption in accounting means that potential expenses and liabilities are recognized immediately, but potential revenues and assets are not recognized until they are realized. This can lead to higher amounts being reported for liabilities, as it encourages erring on the side of caution and recognizing liabilities sooner rather than later.

Application of the (Prudence)conservatism Assumption Can Produce