Question -
Answer -
The concept is based on the Conservatism principle It has the following considerations:
1. Incomes should be calculated properly so that profits are not overestimated.
2. As profit is not calculated in excess, it prevents dividend distribution from capital.
3. Provision for doubtful debts should be made
4. Stocks to be valued at either cost price or market price whichever is lower.
5. Intangible assets should be accounted
6. Protects against uncertainty in business.