Question

What accounting principle says that when given a choice on financial statements, you should choose the option that makes the business look worse?

a. Consistency Principle
b. Materiality Principle
c. Conservatism Principle
d. Going Concern Principle

Answer 1

The Conservatism Principle advises businesses to choose the option on financial statements that makes them appear more cautious, recognizing expenses and liabilities promptly.

Step-by-step explanation:

The accounting principle that suggests choosing the option that makes the business look worse when presented with a choice on financial statements is the Conservatism Principle. This principle advises to err on the side of caution and not to overstate assets or revenues, but to recognize expenses and liabilities as soon as possible. This approach helps ensure that financial statements do not mislead investors and creditors by presenting an overly optimistic view of the company's financial condition.