Question

A business firm creates provision against doubtful debts under which convention ?

Answer 1

Answer:

convention of conservatism

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Answer 2

Answer:

A commercial firm must make provision for questionable debts under the Convention of Conservatism.

Explanation:

• The Accounting Convention of Conservatism, commonly known as the Prudence Doctrine, is an accounting convention.

• According to the conservative convention, expenses and liabilities should be recorded as soon as feasible, while revenues and assets should be recorded only when they are certain to materialize.
• Because it gives an estimate of debts that will arise in the coming year, provision for dubious debts is technically a current liability account.

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