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    Question

    Which of the following principle applies when Provision for Doubtful Debts is required to be maintained in the books of accounts?

    A Full Disclosure Correct Answer Incorrect Answer
    B Materiality Correct Answer Incorrect Answer
    C Conservatism Correct Answer Incorrect Answer
    D Consistency Correct Answer Incorrect Answer
    E Going concern Correct Answer Incorrect Answer

    Solution

    Conservatism principle states that record for the anticipated losses and Expenses. It is also called prudence principle. Example-Provision for Doubtful debt - The debtors have not defaulted yet, but if you are anticipating a default in the future, record it as an expense now. Also, Valuation of Inventory is done at Cost or Net Realizable Value, whichever is less.

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