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What type of concept example is this?
Uncertainty and risks inherent in business situations should be adequately considered in financial reporting.

What type of concept example is this?<br/>
Uncertainty and risks inherent in business situations should be adequately considered in financial reporting.

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A. Neutrality.
B. Completeness.
C. Representational faithfulness.
D. Conservatism.
Asked by Savannah, Last updated: Sep 19, 2020

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2 Answers

E. Stanley

E. Stanley

E. Stanley
E. Stanley, Technical writer, Indianapolis

Answered Aug 29, 2018

The answer to this is letter D. There are a lot of business owners who are still holding on to their tried and tested ways without realizing that times have changed greatly over the past decades. There are things that still work the same. There are still methods that may be considered great for business but there are also some changes that can help improve the business in an awesome manner.

There are some socially conservative ideas that are available at present time and may work well but they are not always effective right now. Get to know more methods that can further improve business and it might become more useful.

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John Smith

John Smith

John Smith
John Smith

Answered Sep 08, 2016

Conservatism.-under the conservatism constraint, when alternative accounting methods are appropriate, the one having the less favorable effect on net income and total assets is preferable. however, conservatism does not permit a deliberate understatement of total assets and net income. furthermore, sfac 5 describes a general tendency to emphasize purchase and sale transactions and to apply conservative procedures in accounting recognition. this tendency is a response to uncertainty. for example, revenues usually are not recognized before sale unless they are readily realizable. uncertainty may be reduced because quoted prices are available in active markets for interchangeable units.
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