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Hi Max.Thanks so much for starting our discussion this week! Youmade an excellent point...

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Accounting

Hi Max.Thanks so much for starting our discussion this week! Youmade an excellent point about the principle of conservatism! Whensome people hear that accountants are conservative, they maymisconstrue it to assume that the accountants are intentionallyunderstating accounts. However, this is not the case at all. Itsimply means that we stay on the side of caution and upon equallylikely outcomes, we assume the one that is the least likely tooverstate net income or net assets.

Class, what are your thoughts on conservatism as it relates toEarning Quality?

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The principal of conservatism is the general concept of recognizing expenses and liabilities as even if there is uncertainity of the outcome but the revenues and assets are recognised only if there is certainity of being received Hence It says to provide for all expenses and    See Answer
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In: AccountingHi Max.Thanks so much for starting our discussion this week! Youmade an excellent point about...Hi Max.Thanks so much for starting our discussion this week! Youmade an excellent point about the principle of conservatism! Whensome people hear that accountants are conservative, they maymisconstrue it to assume that the accountants are intentionallyunderstating accounts. However, this is not the case at all. Itsimply means that we stay on the side of caution and upon equallylikely outcomes, we assume the one that is the least likely tooverstate net income or net assets.Class, what are your thoughts on conservatism as it relates toEarning Quality?

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