GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Which of the following accounting concepts has the working rule: “anticipate no profits but provide for all possible losses. “?
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Materiality concept
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Consistency concept
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Conservatism concept
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Revenue recognition concept
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Explanation:
Detailed explanation-1: -According to the Conservatism Principle, profits should not be anticipated; however, all losses should be accounted (irrespective whether they occurred or not). It states that profits should not be recorded until they get recognised; however, all possible losses even though they may happen rarely, should be provided.
Detailed explanation-2: -Correct answer is (b) Conservatism.
Detailed explanation-3: -Answer-According to the convention of conservatism, all anticipated losses should be recorded in the books of accounts but all anticipated gains should be ignored.
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