Question

Current Liabilities are normally recorded at the amount expected to be paid rather than at their present value. This concept can be supported by gaap according to the concept of:

1) Matching
2) Consistency
3) Materiality
4) Conservatism

Answer 1

Current liabilities are normally recorded at the amount expected to be paid rather than at their present value, and this can be supported by GAAP according to the principle of Conservatism. Hence, the correct answer is option (4).

Step-by-step explanation:

The concept that current liabilities are normally recorded at the amount expected to be paid rather than at their present value can be supported by GAAP according to the concept of Conservatism. The principle of Conservatism in accounting suggests that when there are uncertainties in recording financial transactions, accountants should be conservative and choose the option that is less likely to overstate assets or income.

In the case of current liabilities, since they are expected to be settled in the short term, their value is not typically discounted to present value unless the effect of discounting is material.