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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Accruing net losses on obsolete inventory is an example of the accounting concept of:

  1. a. conservatism
  2. b. historical cost
  3. c. consistency
  4. d. materiality

To determine

Identify whether the accruing net losses on obsolete inventory is an example of the accounting concept.

Explanation

Financial reporting:

Financial reporting is the procedure used to communicate the information obtained from financial statements prepared for a company. It is essential to disclose the data to various stakeholders of the company, as various decisions need to be taken by the stakeholders.

Conservatism:

Conservatism is an accounting assumption, it is as an approach used by the accountants to avoid the overstating of net assets and net income when the amounts are uncertain.

Option (a):

Accruing net losses on obsolete inventory is an example of the accounting concept of Conservatism. Therefore, Option a, is the correct answer.

Option (b):

Accruing net losses on obsolete inventory is an example of the accounting concept of Conservatism...

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