Convention of Prudence [June 2023, l Mark]
Options
A
B
C
D
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Theoretical FrameworkQuestion 4615 of 110
All Questions Correct Answer
✅ Option — Correct Option
All Options:
- A
- B
- C
- D
Detailed Solution & Explanation
Convention of Prudence/ Conservative Approach:
An accountant is supposed to be conservative therefore expenses or losses are
provided if there is possibility of its occurrence, but incomes are provided only if
there is certainty of its earning.
It is application of a caution while estimating & accounting, such that expense &
liabilities are not understated & income & assets are not overstated.
But it does not justify creation of hidden reserve by deliberate understatement of
assets & incomes & overstatement of Liabilities & expenses.
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