Convention of conservatism
From Wikipedia, the free encyclopedia
In business, investment, and accounting, the principle or convention of Conservatism has at least two meanings.
In investment and finance, it is a strategy which aims at long-term capital appreciation with low risk. It can be characterized as moderate or cautious and is the opposite of aggressive behavior.
In accounting, it states that when choosing between two solutions, the one that will be least likely to overstate assets and income should be selected.
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according to this concept "expected lossess are lossess but expected gain are not gains" on the basis of this concept only closing stock is valued at cost price and market price whichever is lower. provision for bad and doubtful debts are maitained.
