Conservatism means:
A)not underestimating asset values,when faced with uncertainty about the value of assets and liabilities.
B)not overestimating liabilities,when faced with the uncertainty about the value of assets and liabilities.
C)using the least optimistic measurement when faced with uncertainty about the value of assets and liabilities.
D)using the most optimistic measurement when faced with uncertainty about the value of assets and liabilities.

Question

Quizplus · Accepted Answer

Conservatism in accounting refers to the principle of using the least optimistic measurement when faced with uncertainty about the value of assets and liabilities. This ensures that financial statements are not overstated, and that future losses are anticipated and accounted for. It is important for providing accurate and reliable financial information to stakeholders. Option A is incorrect because it suggests not underestimating assets values, which would be optimistic and contrary to the principle of conservatism. Option B is incorrect because it suggests not overestimating liabilities, which again would be optimistic and not conservative. Option D is incorrect because it suggests using the most optimistic measurement, which is the opposite of conservatism.

Conservatism Means