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What do you understand by the concept of conservatism . Why is it also called the concept of prudence. Why is it not applied as strongly today as it used to be in the Past?
Wiki User
∙ 10y ago
"conservatism in the balance sheet is of dubious value if attained at the
expense of conservatism in the income statement, which is far more
significant."
A branch of accounting that requires a high degree of verification before making a legal claim to any profit. Accounting conservatism will recognize all probable losses as they are discovered and most expenditures as they are incurred. Revenue will be deferred until it is verified. Having strict revenue-recognition criteria is one of the most common forms of accounting conservatism.
Wiki User
∙ 10y ago
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What is the accounting concept or principle applied when an allowance is provided for estimated uncollectible accounts receivable?
Setting up an allowance for uncollectible accounts is an application of the Principle of Conservatism. The idea is that when there are uncertain outcomes, you don't want to make the company look "too good," because that might mislead financial statement users.
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What do you understand by the concept of conservatism Why is it also called the concept of prudence Why is it not applied as strongly today as it used to be in the Past?
Conservatism is basically a belief in keeping things as they are, and in respect or reverence for tradition and the established social order. Conservatism is prudent to the extent that all change involves an element of risk; you never really know if a change will work out well or badly. Conservatism is difficult to apply as strongly as it once was (although there are people who are trying very hard) because the world itself has undergone vast changes in recent centuries, and old solutions do not work as well as they used to, in a changed world. Technological change, in particular, tends to defeat all efforts to keep things the same.
How is prudence applied?
prudence could be applied to any judgment, the more difficult tasks, which distinguish a person as prudent, are those in which various goods have to be weighed against each other, as when a person is determining what would be best to give charitable donations, or how to punish a child so as to prevent repeating an offense.
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Psychological perspectives such as cognitive, behavioral, psychodynamic, and humanistic can be applied to understand individual behavior. These perspectives focus on different aspects of the individual's mental processes, behaviors, unconscious motivations, and personal growth. By considering these perspectives, psychologists can gain insights into the underlying factors influencing an individual's behavior.
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