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The concept of prudence usually applies to the question of when you should recognise profit. A basic example would the fact that you record inventory in your accounts at the lower of cost and net realisable value, rather than at sale price, which (hopefully) contains a profit element. Instead the profit is only recognised when a legally enforceable sale has taken place.
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∙ 16y ago
An example of the prudence concept in finance is when a company chooses to underestimate its future revenues or assets, but overestimate its expenses or liabilities. This conservative approach helps to avoid overstating financial results, which can lead to more realistic financial reporting.
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What is prudence concept?
The concept of prudence in accounting is the exercise of caution and careful judgment when preparing financial statements. It involves ensuring that assets and profits are not overstated and liabilities and expenses are not understated, leading to a more conservative approach to financial reporting. Prudence helps to provide a more accurate and reliable representation of a company's financial position and performance.
What philosophical concept is demonstrated in this example?
The concept of determinism is demonstrated in this example as it suggests that events are determined by previous causes, indicating a lack of free will in decision-making.
What does exemplified mean?
Exemplified means to serve as a typical example of something or to illustrate a particular quality or trait. It can also refer to providing a clear demonstration or instance of a concept or idea.
Differences between concept construct and variables?
A concept is an abstract idea or general notion, while a construct is a theoretical idea that is created to explain or represent a concept. Variables, on the other hand, are measurable quantities that can vary or change in a study. Constructs help define and operationalize concepts into measurable variables for research purposes.
What is an example of the elitist theory?
An example of the elitist theory is the concept that power in society is concentrated in the hands of a select, privileged few who make decisions that benefit themselves at the expense of the majority. This theory suggests that a small elite group exercises control over governmental decisions and policies in ways that maintain their status and influence.
Advantages of prudence concept in financial accounting?
list 5 advantages of prudence concept
What is an example of prudence?
deprecation is the example of prudence
What concept is used in allowance for doubtful debts?
Prudence concept
Explain the importance of the Prudence concept?
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Prudence Concept in accounting?
preparation of account involve estimations, measurements and and valuations according to the conservatism or prudence concept it is a good practice to follow a procedure that tends to understate things.
What is an example of a sentence using the word prudence?
She showed great prudence by carefully considering all the options before making a decision.
How can you use the word prudence in a sentence?
She advised him to exercise prudence with his finances, urging him to save rather than spend impulsively.
Why concept of conservatism is called prudence?
Conservatism is often seen as prudence. People who are conservative do not waste things or use resources unwisely. This may make them seem as if they are prudish.
What are accrual concept and prudence concept?
According to accural concept, expenses incurred and revenue earned during the accounting period should be recorded in the same period of accounts regardless of the actual receipt of payment of cash. According to prudence concept revenue should be recognized only when it has been realized.Revenue is recognized in the period in which it is earned irrespective of the fact whether it is received or not during that period. for example: when a product delivered to a customer the company records a revenue even though the customer will pay after 30 days.
Does accounting concepts conflict?
Accruals and prudenceThe accruals concept requires future income (e.g. in relation to credit sales) to be accrued. The prudence concept dictates that caution should be exercised, so that if there is doubt about the subsequent receipt, no accrual should be made.Consistency and prudenceIf circumstances change, prudence may conflict with the consistency concept, which requires the same treatment year after year.In both situations, prudence must prevail.
Example of prudence?
she uses prudence when listening to tv ads.
What is an example of a concept?
An example of a concept is called a prototype.
