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No inference of profit and the provision making policy for all possible losses is due to:
- a)Convention of Consistency
- b)Convention of Conservatism
- c)Convention of Disclosure
- d)Convention of Materiality
Correct answer is 'B'. Can you explain this answer?
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Verified Answer
No inference of profit and the provision making policy for all possibl...
The Concept of Conservatism states that the accountant should not anticipate income and should provide for all possible losses. This clearly shows that no inference of profit should be made and all possible losses should be incorporated.
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No inference of profit and the provision making policy for all possibl...
Convention of Conservatism
The Convention of Conservatism is a principle of accounting that requires companies to account for all possible losses but never to record potential gains. This means that companies must be conservative in their accounting practices, recognizing losses as soon as they are probable, but delaying recognition of gains until they are certain.
Explanation:
The Convention of Conservatism is an important principle in accounting that ensures that companies are conservative in their accounting practices, recognizing losses as soon as they are probable, but delaying recognition of gains until they are certain. This principle helps to ensure that financial statements are accurate and reflect the true financial position of the company.
The provision making policy for all possible losses is due to the Convention of Conservatism. By creating provisions for all possible losses, companies can ensure that they are prepared for any potential losses that may occur in the future. This helps to mitigate the risk of financial loss and ensures that the company is able to continue operating even in the event of a significant loss.
The Convention of Conservatism also ensures that companies are transparent in their accounting practices. By recognizing losses as soon as they are probable, companies are able to provide accurate financial statements that reflect the true financial position of the company. This helps to build trust with stakeholders and ensures that investors are able to make informed decisions about investing in the company.
Conclusion:
In conclusion, the Convention of Conservatism is an important principle of accounting that requires companies to account for all possible losses but never to record potential gains. This principle helps to ensure that financial statements are accurate and transparent, and that companies are prepared for any potential losses that may occur in the future. By following this principle, companies can build trust with stakeholders and ensure that they are able to continue operating even in the event of a significant loss.
The Convention of Conservatism is a principle of accounting that requires companies to account for all possible losses but never to record potential gains. This means that companies must be conservative in their accounting practices, recognizing losses as soon as they are probable, but delaying recognition of gains until they are certain.
Explanation:
The Convention of Conservatism is an important principle in accounting that ensures that companies are conservative in their accounting practices, recognizing losses as soon as they are probable, but delaying recognition of gains until they are certain. This principle helps to ensure that financial statements are accurate and reflect the true financial position of the company.
The provision making policy for all possible losses is due to the Convention of Conservatism. By creating provisions for all possible losses, companies can ensure that they are prepared for any potential losses that may occur in the future. This helps to mitigate the risk of financial loss and ensures that the company is able to continue operating even in the event of a significant loss.
The Convention of Conservatism also ensures that companies are transparent in their accounting practices. By recognizing losses as soon as they are probable, companies are able to provide accurate financial statements that reflect the true financial position of the company. This helps to build trust with stakeholders and ensures that investors are able to make informed decisions about investing in the company.
Conclusion:
In conclusion, the Convention of Conservatism is an important principle of accounting that requires companies to account for all possible losses but never to record potential gains. This principle helps to ensure that financial statements are accurate and transparent, and that companies are prepared for any potential losses that may occur in the future. By following this principle, companies can build trust with stakeholders and ensure that they are able to continue operating even in the event of a significant loss.
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No inference of profit and the provision making policy for all possibl...
The conservatism principle is an accounting principle that requires accountants to provide for all losses, but not anticipate profits. This principle is based on the idea that a cautious approach should be taken when estimating income and assets. It helps businesses deal with uncertainty and unforeseen conditions.
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No inference of profit and the provision making policy for all possible losses is due to:a)Convention of Consistencyb)Convention of Conservatismc)Convention of Disclosured)Convention of MaterialityCorrect answer is 'B'. Can you explain this answer?
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