Question

The principle of Conservatism, says that a company should choose measurement methods that anticipate and record _____________ but don't anticipate and record _____________.

A. Losses but don't anticipate and record gains.
B. Gains but don't anticipate and record losses.
C. Both losses and gains.
D. Neither losses nor gains.

Answer 1

The principle of Conservatism in accounting states that a company should choose measurement methods that anticipate and record losses, but don't anticipate and record gains. The correct answer is A. Losses but don't anticipate and record gains.

Step-by-step explanation:

The Conservatism principle in accounting dictates that companies should be prudent and anticipate losses but not gains in their financial reporting. Therefore, the correct answer is A. Losses but don't anticipate and record gains.

The principle of Conservatism in accounting suggests that a company should choose measurement methods that anticipate and record losses but don't anticipate and record gains. Therefore, the correct answer is A. Losses but don't anticipate and record gains.

This accounting principle is based on a concept of prudence, ensuring that companies are not overstating their financial position. By recognizing potential losses, a company can provide a more cautious and thus potentially more realistic view of its financial status to stakeholders.

The correct answer is A. Losses but don't anticipate and record gains.