The accounting convention of ________ means selecting the method of measurement that provides the most pessimistic immediate results.
A) cost benefit
B) objectivity
C) materiality
D) conservatism

Question

Quizplus · Accepted Answer

The convention of conservatism requires selecting the method of measurement that gives the most pessimistic immediate results. This means that when there are multiple acceptable options for measuring an item, accountants must choose the option that understates assets, revenues, and profits or overstates liabilities, expenses, and losses. This convention is designed to ensure that financial statements are not overly optimistic and that investors and creditors have a realistic understanding of a company's financial position. The other options listed (cost benefit, objectivity, and materiality) are important accounting concepts but are not specifically related to the convention of conservatism.

The Accounting Convention of ________ Means Selecting the Method of Measurement