When a new company was formed, one partner contributed some used equipment he owned. The equipment was appraised at $44,000 and $50,000 by two different dealers. The accountant entered the equipment at $44,000 in the financial records of the partnership. This is an example of

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This is an example of the conservatism principle, which requires accountants to choose the option that is least likely to overstate assets or income. In this case, the accountant chose the lower appraisal value of $44,000, which is less likely to overstate the value of the equipment.

When a New Company Was Formed, One Partner Contributed Some