A company is uncertain whether a complex transaction should be recorded as gain or loss.Under the conservatism principle,it should choose to treat it a loss.

Question

Quizplus · Accepted Answer

According to the conservatism principle, when there is uncertainty about the treatment of an item, it is better to err on the side of caution and record it as a loss rather than a gain. This helps to prevent overstatement of income and assets, and ensures that financial statements are more reliable. Therefore, in this scenario, the company should choose to treat the transaction as a loss.

A Company Is Uncertain Whether a Complex Transaction Should Be