A policy of caution when estimating uncertain amounts is an example of:
A) consistency
B) prudence
C) understandability
D) materiality.

Question

Quizplus · Accepted Answer

The policy of caution when estimating uncertain amounts falls under the principle of prudence, which states that financial statements should not overestimate assets nor underestimate liabilities. Prudence encourages the use of caution when making estimates and exercising judgement in situations where there is uncertainty.

A Policy of Caution When Estimating Uncertain Amounts Is an Example