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WAEC Financial Accounting 2014 Question 29

Question 29

Accounting Concepts and Conventions

The concept that states that a business should not lay claim to any profits before it is earned with reasonable certainty is

  1. A.consistency concept.
  2. B.prudence concept.
  3. C.accrual concept.
  4. D.going concern concept.
Show the answer and explanation

Answer: B (prudence concept.)

Explanation

Prudence (conservatism) says profits should not be anticipated; they are recognised only when reasonably certain, while losses are provided for.