The conservatism constraint requires that:
A)When more than one equally likely estimate of the amount to be received or paid in the future exists, the less optimistic amount should be used.
B)A company use the same accounting methods period after period.
C)Revenues and expenses be reported in the period in which they are earned or incurred.
D)All items of a material nature be included in financial statements.
E)All inventory items be reported at full cost.

Question

Quizplus · Accepted Answer

The conservatism constraint requires that when more than one equally likely estimate of the amount to be received or paid in the future exists, the less optimistic amount should be used. This is because conservatism dictates that the financial statements should not overstate assets or income and should fairly and conservatively represent the financial position and performance of the organization.

The Conservatism Constraint Requires That