[amp_mcq option1=”Convention of conservatism” option2=”Convention of consistency” option3=”Convention of materiality” option4=”Convention of full disclosure” correct=”option1″]<\/p>\n
The correct answer is: A. Convention of conservatism.<\/p>\n
The convention of conservatism is a principle of accounting that states that accountants should err on the side of caution when making estimates. This means that they should choose the estimate that is most likely to result in a lower net income, rather than the estimate that is most likely to result in a higher net income.<\/p>\n
The assumption that “Anticipate no profit and provide for all losses” is based on the convention of conservatism. This assumption means that accountants should not anticipate profits that have not yet been earned, and should instead provide for all losses that are likely to occur. This helps to ensure that financial statements are not misleading, and that investors are not given an overly optimistic view of a company’s financial performance.<\/p>\n
The other options are not correct. The convention of consistency is a principle of accounting that states that companies should use the same accounting methods from period to period. This helps to ensure that financial statements are comparable over time. The convention of materiality is a principle of accounting that states that only information that is important enough to affect a decision should be included in financial statements. The convention of full disclosure is a principle of accounting that states that all relevant information should be disclosed in financial statements.<\/p>\n
I hope this helps!<\/p>\n","protected":false},"excerpt":{"rendered":"
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