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

Explanation

According to the political orientation Principle, profits mustn't be anticipated; but, all losses ought to be accounted (irrespective whether or not they occurred or not). It states that profits mustn't be recorded till they get recognized; but, all attainable losses despite the fact that they'll happen seldom, ought to be provided. as an example, stock is valued at value or value, whichever is lower.


If the worth market value is less than the price, loss ought to be accounted; whereas, if the previous is quite the latter, then this profit mustn't be recorded till unless the stock is sold-out. There are varied provisions that are maintained supported the political orientation principle like, provision for discount to debtors, provision for uncertain unhealthy debts, etc.


This principle relies on the sense and depicts pessimism. This additionally helps the business to deal uncertainty and unforeseen conditions.