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How does relevance of the concept of prudence to bad debts and the provision for doubtful debts?
The prudence concept assumes that the worst can happen and tries to account for it in the accounts.
The provision for doubtful debts is an estimated percentage of debtors that are not expected to pay during the year. All the debtors may pay up during the year, meaning that the provision for doubtful debts was unnecessary, but it still lets the companies account for any possible bad debts during the year.
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What is the relationship between a flow concept and a stock concept?
The flow concept is the one in which goods and services move from person to person. In the stock concept, stocks build up or get depleted, they do not flow.
What is the concept of dividend policy in multinational firms?
concept of dividend policy
Contrast product and production concept?
There are a few different contrasts between product and production concept. Production concept is the general idea of how something will be done and product is what is actually produced.
What examples best describe the going concern concept?
what exmples best describe the going concern concept
Discuss the concept of scarcity?
The concept of scarcity is rather simple. Something is considered to be scarce when it is very limited, unavailable momentarily, or understocked.
What concept is used in allowance for doubtful debts?
Prudence concept
Why provision for doubtful debt is prepared?
Provision for doubtful debt account is created by company to steadly build the stream of money in a separate fund to handle the actual bad debts properly and to maintain steady stream of profits or loss as well.
Advantages of prudence concept in financial accounting?
list 5 advantages of 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.
The convention of conservatism takes into account all prospective profits but leaves all prospective losses?
According to this concept "expected losses are losses but expected gains are not gains". On the basis of this concept closing stock is valued at cost price or market price, whichever is lower. Provision for bad and doubtful debts are maintained.
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.
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.
How Prudence concept applies to vehicles and equipment?
The concept of prudence in the context of vehicles and equipment refers to the careful management and consideration of risks associated with their use and maintenance. This includes regular inspections, proper usage, and timely repairs to prevent accidents and prolong lifespan. Additionally, prudence involves making informed decisions about purchasing, operating, and disposing of vehicles and equipment, ensuring that investments are justified and aligned with safety standards. Overall, applying prudence helps minimize financial loss, enhance safety, and improve operational efficiency.
What is prudence concept?
From the Webster's Online Dictionary: The prudence concept states that profits and inventory should never be over stated an losses must not be under stated . the concept must be use when producing financial statements.... Next time you need an answer like this, just type in the words: Prudence Concept in your navigation bar and presto: Answer supplied.
How deprecaition interacts with prudence and matching concepts?
Prudence concept tends to understate the profit . depreciation is a tool through which we record our losses , which means that our profit is declining .This means that depreciation is a supportive tool for reducing profit. Matching concept tends to record the expense to the revenue generated from the assets . Hence depreciation fulfils the requirements of both the concepts .
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.
