In accounting, what does the principle of prudence (konservativnost) require accountants to do?
Answer and explanation
Correct answer: C. Anticipate potential losses immediately but recognize revenues only when realized
- Step 1: The accounting principle of prudence dictates that expenses and liabilities must be recognized as soon as they are foreseeable, whereas revenues are recognized only when realized. Answer: Anticipate potential losses immediately but recognize revenues only when realized. Why not the others: Recognizing unearned profits violates revenue recognition, overstating assets is fraudulent, and omitting expenses violates completeness.
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