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JAMB Principles of Accounts 1994 Question 3

Question 3

Accounting Concepts and Conventions

The accounting convention which states that 'profit must not be recognized until realized while all losses should be adequately provided for' is termed

  1. A.materiality
  2. B.objectivity
  3. C.consistency
  4. D.conservatism.
Show the answer and explanation

Answer: D (conservatism.)

Explanation

Conservatism (prudence) means not anticipating profits but providing for all known losses.