Points of consideration while selecting accounting policies: prudence: it says that as the future is uncertain all the probable loss is to be considered but not probable gain. it means while choosing the accounting policy enterprise should consider the point of prudence..example..creation of provision for the liability is normally an accounting policy and whether to create the provision for the particular liability in the balance sheet is a matter of prudence But the applying prudence doesn’t mean that enterprise can create an unnecessary provisions for losses and understate the profit,… they will record the losses only when the chances of happening loss in future is more than chances of not happening loss.
Posted on: Sun, 08 Sep 2013 07:27:00 +0000