A company is uncertain whether a complex transaction should be recorded as an asset or as an expense.Under the conservatism principle,they should choose to treat it as an asset.

Question

Quizplus · Accepted Answer

The conservatism principle is the principle of choosing the option that results in lower net income or lower asset values. In this case, if there is uncertainty about whether to record the transaction as an asset or an expense, choosing to record it as an asset would result in higher asset values and potentially higher net income, which goes against the conservatism principle. Therefore, the correct option would be to record it as an expense.

A Company Is Uncertain Whether a Complex Transaction Should Be