Discuss the concept-based on the premise ‘do not anticipate profits but provide for all losses’

Explanation

According to the ideology Principle, profits shouldn't be anticipated; but, all losses ought to be accounted (irrespective whether or not they occurred or not). It states that profits shouldn't be recorded till they get recognized; but, all doable losses although they will happen seldom, ought to be provided for instance, stock is valued at price or market value, whichever is lower.


If the worth market value value} is below the value price, loss ought to be accounted; whereas, if the previous is quite the latter, then this profit shouldn't be recorded till unless the stock is oversubscribed.


There square measure varied provisions that square measure maintained supported the ideology principal like, provision for discount to debtors, provision for uncertain unhealthy debts, etc. This principle relies on the wisdom and depicts pessimism. This additionally helps the business to deal uncertainty and unforeseen conditions.