Question

The conservatism constraint prescribes that:

a) A company use the same accounting methods period after period.

b) All items of a material nature are included in financial statements.

c) All inventory items are reported at full cost.

d) Revenues and expenses are reported in the period in which they are earned or incurred.

e) When multiple estimates of amounts to be received or paid in the future are equally likely, then the least optimistic amount should be used.

Answer 1

Option E

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.

Step-by-step explanation:

Conservatism constraint designates the aid of the less optimistic amount when more extra than unity assessment of the amount to be collected or repaid endures and these assessments are thereby uniformly likely.

The conservatism constraint suggests that, all annexes equal, we require to choose the postulate that is more moderate for assets and more leading for liabilities, these hypotheses forming the company resemble worse or most traditional. Conservatism constraint restricts the opportunity of economic statements being proffered that are emphasized, an overstatement that investors could perform on.