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      Question

      Which of the following principle applies when Provision

      for Doubtful Debts is required to be maintained in the books of accounts?
      A Full Disclosure Correct Answer Incorrect Answer
      B Materiality Correct Answer Incorrect Answer
      C Conservatism Correct Answer Incorrect Answer
      D Consistency Correct Answer Incorrect Answer
      E Going concern Correct Answer Incorrect Answer

      Solution

      Conservatism principle states that record for the anticipated losses and Expenses. It is also called prudence principle. Example-Provision for Doubtful debt - The debtors have not defaulted yet, but if you are anticipating a default in the future, record it as an expense now. Also, Valuation of Inventory is done at Cost or Net Realizable Value, whichever is less.

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