What is the Prudence Concept?
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WHAT IS THE PRUDENCE CONCEPT?
The prudence concept states that the final accounts should always report conservative and cautious figures. This includes the figure for the profit and the valuation of assets. Additionally, the business should not overvalue its profits or assets nor should it understate losses or liabilities. Also profits are not to be anticipated but recognised when they can be reliably measured. When there is any doubt of valuing an item, the concept suggests that the item is recorded at a “prudent” amount, in other words, it should reflect as a conservative and cautious amount in the accounts. The concept is applied to the accounts of a business in many ways. The most common use of the prudence concept is the creation and application of the provision for depreciation. In short, the provision is a book entry to reduce the value of an asset over its lifetime; as a result the asset book value and profits are reduced to make these values more prudent. Another main use of the concept is the practice of the provision for bad debts or doubtful debts. The provision again is a book entry which reduces the amount of debts owed to the business this results in the debtors figure being reduced and therefore the amount reflected is more conservative and cautious.
This video will help you with questions such as what is the prudence concept, what is prudence concept in accounting, what is prudence concept example, prudence concept another name, prudence concept takes into account, what is the prudence concept in business, what is the prudence concept example, what is the concept of prudence ACCA, what is the concept of prudence in IFRS, what is the purpose of the prudence.
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DISCLAIMER
Our content is to be used as an EDUCATIONAL TOOL that aims to provide a foundation for individuals to learn financial accounting, management accounting and bookkeeping topics as practiced in the United Kingdom. As a result, not all complexities are shown or provided. Examples may include but are not limited to; differences between financial reporting, accounting standards or tax treatments. We are NOT ENGAGED in the providing of accounting, bookkeeping, financial, investment, tax, or other professional services. You should consult with a qualified or professional such as an accountant, business advisor, investment specialist, lawyer, solicitor, etc., with regards to specific facts and situations.
#prudenceconcept #accountingconcept #accountingconcepts
WHAT IS THE PRUDENCE CONCEPT?
The prudence concept states that the final accounts should always report conservative and cautious figures. This includes the figure for the profit and the valuation of assets. Additionally, the business should not overvalue its profits or assets nor should it understate losses or liabilities. Also profits are not to be anticipated but recognised when they can be reliably measured. When there is any doubt of valuing an item, the concept suggests that the item is recorded at a “prudent” amount, in other words, it should reflect as a conservative and cautious amount in the accounts. The concept is applied to the accounts of a business in many ways. The most common use of the prudence concept is the creation and application of the provision for depreciation. In short, the provision is a book entry to reduce the value of an asset over its lifetime; as a result the asset book value and profits are reduced to make these values more prudent. Another main use of the concept is the practice of the provision for bad debts or doubtful debts. The provision again is a book entry which reduces the amount of debts owed to the business this results in the debtors figure being reduced and therefore the amount reflected is more conservative and cautious.
This video will help you with questions such as what is the prudence concept, what is prudence concept in accounting, what is prudence concept example, prudence concept another name, prudence concept takes into account, what is the prudence concept in business, what is the prudence concept example, what is the concept of prudence ACCA, what is the concept of prudence in IFRS, what is the purpose of the prudence.
MUSIC CREDIT
@benfrydrums
DISCLAIMER
Our content is to be used as an EDUCATIONAL TOOL that aims to provide a foundation for individuals to learn financial accounting, management accounting and bookkeeping topics as practiced in the United Kingdom. As a result, not all complexities are shown or provided. Examples may include but are not limited to; differences between financial reporting, accounting standards or tax treatments. We are NOT ENGAGED in the providing of accounting, bookkeeping, financial, investment, tax, or other professional services. You should consult with a qualified or professional such as an accountant, business advisor, investment specialist, lawyer, solicitor, etc., with regards to specific facts and situations.
#prudenceconcept #accountingconcept #accountingconcepts
7 سال پیش
در تاریخ 1396/05/16 منتشر شده
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