Thanks Nacho!
I was also wondering if anyone could create some questions that need me to identify why it's the Conservatism Principe??
These are some examples from the book that I have trouble explaining when it is Conservatism:
- In October 2008, Mark Larkin, the owner of Larkin Lighting, decided that the firm's stock should be valued at its selling price rather than its cost price because, according to Mark, 'That's what it is actually worth'
a) Referring to two Accounting principle, explains why the stock must be valued at its cost price.
I know that one is the Historical Cost Principle, but the other one is suppose to be Conservatism but I'm unsure why???
- Erica Carr's business has been sued for false advertising, and her solicitor has indicated that she is likely to lose the forthcoming court case. Damages have been estimated at $55 000, but Erica has not reported the damages in the Profit and Loss statement.
a) Referring to one accounting principle, explain why Erica should disclose the damages in the Profit and Loss Statement..
Again its Conservatism but why??
So if anyone has any practice questions of determining Conservatism would be great
!!
Thanks!