Question

Provision for bad and doubtful debts is created in anticipation of actual bad debt on the basis of

• A. Business entity concept
• B. Conservation concept
• C. Going concern concept
• D. Full disclosure concept

Answer 1

Answer:

B. Conservation concept

Accounting conservatism is a principle that requires company accounts to be prepared with caution and high degrees of verification. All probable losses are recorded when they are discovered, while gains can only be registered when they are fully realized.