Question

The conservatism constraint prescribes that:

a.when multiple estimates of amounts to be received or paid in the future are equally likely, then the least optimistic amount should be used.
b.a company use the same accounting methods period after period.
c.revenues and expenses are reported in the period in which they are earned or incurred.
d.all items of a material nature are included in financial statements.
e.all inventory items are reported at full cost.

Answer 1

The conservatism constraint prescribes that when multiple estimates of amounts to be received or paid in the future are equally likely, then the least optimistic amount should be used.

When in doubt, follow the conservatism constrain process which wants sure information is reported that does not overstate income or assets.