Question

According to this principle, record all anticipated losses but ignore all anticipated gains. Industry practice.

Options

• Materiality

• Consistency

• Conservatism

• Timeliness

Answer 1

Conservatism

Explanation:

The conservatism principle (also known as the principle of prudence) suggests that accountants should record all anticipated losses but not anticipate any gains when preparing financial statements. This principle encourages caution in reporting and ensures that assets and income are not overstated, while liabilities and expenses are not understated.