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Class 12 Tuition > Learn Accountancy > What do you mean by principal of conservatism in accoun...
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What do you mean by principal of conservatism in accountancy?

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Programming languages trainer with having 8 years experience

The conservatism concept is a concept in accounting which refers to the idea that expenses and liabilities should be recognised as soon as possible in a situation where there is uncertainty about the possible outcome and in contrast record assets and revenues only when they are assured to be received...
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Commerce classes with concept clarity.

Expected losses , kindly consider in your books but expected gains , consider only when realized.
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Working professional with finance background

In simple language it is any gain. They are to be recorded in when it is gonna be recognised. Where as everyloss has to be recorded irrespective of the nature that is the loss may or may not be incurred
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Experienced teaching experience for 20 years

It means cautious approach,that is why we estimate all losses . Provision for bad debts is an example of conservatism principal.This is also called prudence approach
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ACCOUNTANCY EXPERTISE, Maths expert till 10th

This is a principle which says that the company accounts are to be prepared with high degree of verification. All probable losses should be booked whenever found but on the otherhand gains should be booked only when they are fully realized.
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Good Marks with Good Learning and Knowledge

In business we can a loss or profit. But there can be possible loss (like my client will not give complete payment) or possible loss ( like I will receive a huge order). So as per conservatism concept, while preparing the accounts we shall always consider possible loss and have to make a provision for...
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In business we can a loss or profit. But there can be possible loss (like my client will not give complete payment) or possible loss ( like I will receive a huge order).

So as per conservatism concept, while preparing the accounts we shall always consider possible loss and have to make a provision for that. But if there is a possible gain we shoul ignore it till it is realised.

Its also known as Prudence concept.

CA Sunil Kumar

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Good Marks with Good Learning and Knowledge

In business we can have a loss or profit. But there can be possible loss (like my client will not give complete payment) or possible loss ( like I will receive a huge order). So as per conservatism concept, while preparing the accounts we shall always consider possible loss and have to make a provision...
read more

In business we can have a loss or profit. But there can be possible loss (like my client will not give complete payment) or possible loss ( like I will receive a huge order).

So as per conservatism concept, while preparing the accounts we shall always consider possible loss and have to make a provision for that. But if there is a possible gain we shoul ignore it till it is realised.

Its also known as Prudence concept.

CA Sunil Kumar

Thanks 

 

 

 

read less
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The conservatism concept is a concept in accounting which refers to the idea that expenses and liabilities should be recognised as soon as possible in a situation where there is uncertainty about the possible outcome and in contrast record assets and revenues only when they are assured to be received...
Comments
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Phonics and english grammar trainer and freelancing tutor for classes 1 to 5

It means you have to be conservative on losses. Means, you have to record all the certain and uncertain losses to be on safer side. But you should not record any gains is it's not sure or certain.
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