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4RQ

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Horngren'S Financial And Managerial Accounting
Found in: Page 357

Short Answer

What is the goal of conservatism?

The goal of conservatism is to prevent recording any unrealistic figures into the books of accounts.

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Step by Step Solution

Conservatism

The principle of conservatism is based on focusing and being cautious about any losses or unfavorable things rather than only targeting gains and favorable things.

Conservatism leads to the following ideas –

a) Anticipating losses and not gains

b) Recording assets at a reasonable price

c) In reporting, losses, and expenses should be given priority rather than assets or gains.

d) Making the choice for undervalue option rather than overvalue option.

Goal of conservatism

The ultimate goal of conservatism is to provide realistic and accurate figures. It ensures to prevent any malpractice of overvaluing any asset or net income.

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