Concepts

Question 1

Prudence concept

Answer 1

• To avoid overstating profit, current assets and trade receivables
• Losses should be provided as soon as they are anticipated BUT revenues and profit should not be recognised until they are realised.

Question 2

Materiality concept

Answer 2

(in Accounting for NCA)
- It states that information is material if its omission or misstatement could influence the decisions by the primary users of the financial statements.

• Absolute precision in the recording of immaterial transactions are not absolutely essential.