Question

26. Which of the following statements are correct: i) As per the conservatism principle the valuation of stock is at lower of cost or net realizable value. ii) The convention of conservatism takes all the prospective losses but leaves out prospective profits. iii) The Dual aspect concept states the proprietor of a business is treated as External liabilities (a) Option (i) and (ii) is correct Yb) Option (iii) and (ii) is correct (C) Option (i), (ii) and (iii) is correct (d) Option (i) and (iii) is correct​

Answer 1

Answer:

In accounting, the convention of conservatism, also known as the doctrine of prudence, is a policy of anticipating possible future losses but not future gains. This policy tends to understate rather than overstate net assets and net income, and therefore lead companies to "play safe". When given a choice between several outcomes where the probabilities of occurrence are equally likely, you should recognize that transaction resulting in the lower amount of profit, or at least the deferral of a profit.

Explanation: