Question

Q.7 what do you mean by prudence principal explain with example.​

Answer 1

Answer:

The rationale behind prudence is that a company should not recognize an asset at a value that is higher than the amount which is expected to be recovered from its sale or use. Conversely, liabilities of an entity should not be presented below the amount that is likely to be paid in its respect in the future.

Answer 2

The prudence concept, also known as the conservatism principle, is an accounting principle that requires an accountant to record liabilities and expenses as soon as they occur, but revenues only when they are assured or realized.