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What do you mean by principal of conservatism in accountancy?
In business we can a loss or profit. But there can be possible loss (like my client will not give complete payment) or possible loss ( like I will receive a huge order).
So as per conservatism concept, while preparing the accounts we shall always consider possible loss and have to make a provision for that. But if there is a possible gain we shoul ignore it till it is realised.
Its also known as Prudence concept.
CA Sunil Kumar
Thanks
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In business we can have a loss or profit. But there can be possible loss (like my client will not give complete payment) or possible loss ( like I will receive a huge order).
So as per conservatism concept, while preparing the accounts we shall always consider possible loss and have to make a provision for that. But if there is a possible gain we shoul ignore it till it is realised.
Its also known as Prudence concept.
CA Sunil Kumar
Thanks
read less
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