Question

advantages and disadvantages of using prudence in decision making?

advantages and disadvantages of using frugality in decision making?​

Answer 1

Answer:

1)In financial accounting, there are basic concepts that govern the preparation of financial statements. Prudence is one of several basic concepts used for that purpose. It suggests that assets or revenue should not be overstated. On the flip side, liabilities and expenses should not be understated either.

The aim of the prudence concept is to reflect the least favourable position of a business. To those unfamiliar with the concept, it might seem strange to want to do this. After all, a healthy position can work in a business’ favour sometimes. This principle is important in facilitating faithful representation – ensuring that financial statements do not mislead or give false optimism to their various users. As such, the prudence concept is a fundamental accounting...

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