Practice Conservatism (Prudence) - 15.4.1 | 15. Accounting Principles and Concepts | Management 1 (Organizational Behaviour/Finance & Accounting)
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15.4.1 - Conservatism (Prudence)

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Learning

Practice Questions

Test your understanding with targeted questions related to the topic.

Question 1

Easy

What is the conservatism principle in accounting?

💡 Hint: Think about how we treat losses and profits differently.

Question 2

Easy

Give an example of when a company should create a provision for doubtful debts.

💡 Hint: Consider a situation where credit is extended to customers.

Practice 4 more questions and get performance evaluation

Interactive Quizzes

Engage in quick quizzes to reinforce what you've learned and check your comprehension.

Question 1

What does the conservatism principle direct accountants to do?

  • Recognize profits early
  • Anticipate no profits but provide for all possible losses
  • Ignore potential losses
  • All of the above

💡 Hint: Think about how we treat potential losses versus profits.

Question 2

True or False: The conservatism principle suggests that revenue should be recognized when it is probable.

  • True
  • False

💡 Hint: Consider the level of certainty required for revenue recognition.

Solve and get performance evaluation

Challenge Problems

Push your limits with challenges.

Question 1

Given a financial statement with various accounting entries, identify how conservatism is reflected in the recognition of expenses and liabilities versus revenues. Discuss the implications of your findings.

💡 Hint: Consider whether the company is playing it too safe or not cautious enough.

Question 2

A growing tech startup is about to release a new app. Discuss how its management should apply the conservatism principle in their financial forecasts amidst uncertain market reactions.

💡 Hint: Think of ways the app's success could be uncertain.

Challenge and get performance evaluation