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Accounting Principles: Conservatism

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    FAISAL A.
    YE
    FAISAL A.

    What is conservatism ?

    Gabriel O.
    ML
    Gabriel O.

    The conservatism principle helps an accountant decide between two alternatives. For example, if an item in inventory has a cost of $20, but it can be replaced for $15, the conservatism principle directs the account to report the item in inventory at $15 and to immediately report the loss of $5. For an asset such as inventory it means reporting the lower asset amount on the balance sheet and the lower net income amount on the income statement. From the conservatism principle comes the accountants' the lower of cost or market rule for inventory valuation. The conservatism principle does not say that accountants are to be conservative. Accountants should be fair and objective. The conservatism principle is used to "break a tie" between two reasonable options. It is not intended to motivate accountants to beat down a company's earnings and assets

    Wendy C.
    AU
    Wendy C.

    Conservatism May also be known as prudence. Losses should be recognised as soon as the business is aware of their likely event, whilst profits should not be recognised until they actually occur. The net realisable value can be adjusted by adjusting the cost of goods sold calculations.

    Jonathan Bashir Pam Z.
    GB
    Jonathan Bashir Pam Z.

    what is beach under principles of accounting?

    Samuel F.
    ZA
    Samuel F.

    What is the conservatism principle?

    Harrison A.
    AT
    Harrison A.

    what are the major effects of conservatism principle ?

    Zachary B.
    US
    Zachary B.

    What are conservatism accounting principles?

    Ella Rose M.
    MY
    Ella Rose M.

    breach is normally due to overstocks and overpricing

    Caroline Monica M.
    MW
    Caroline Monica M.

    This means that in accounting a loss can be foreseen and recorded while a profit needs verifiability.

    Diamond T.
    US
    Diamond T.

    What is the conservatism principle?

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