The Conservatism Constraint for Financial Reporting States That, If There

question 4

True/False

The conservatism constraint for financial reporting states that, if there is any doubt, companies should aim to avoid overstating assets and income.

---

Definitions:

Current Liabilities

Financial obligations a company is expected to settle within one year or within its normal operating cycle, whichever is longer.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or within the business's normal operating cycle if longer.

Accounts Receivable

Money owed to a business by its customers for goods or services that have been delivered or used, but not yet paid for.

Prepaid Expenses

Payments made for goods or services to be received in the future, recognized as assets on the balance sheet until they are incurred.