Final answer:
The correct approach to gain contingencies is that they are not accrued according to accounting principles, which is guided by the concept of prudence to avoid overstating income or assets. Option C
Step-by-step explanation:
The correct answer regarding gain contingencies is that they are not accrued. According to accounting principles, companies should not recognize potential gains as part of their earnings before the gain is realized or realizable because of the uncertainty associated with such events.
This concept is guided by the prudence concept, which states that we should not overstate income or assets. Gain contingencies might be disclosed in the notes to the financial statements if they are significant, but they are not recorded on the income statement or the balance sheet until they are realized. Option C