The Conservatism Constraint Prescribes That

question 219

Multiple Choice

The conservatism constraint prescribes that:

• A) All items of a material nature are included in financial statements.
• B) When multiple estimates of amounts to be received or paid in the future are equally likely, then the least optimistic amount should be used.
• C) A company use the same accounting methods period after period.
• D) Revenues and expenses are reported in the period in which they are earned or incurred.
• E) All inventory items are reported at full cost.

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Definitions:

Psychosocial Development

The process of personality and emotional growth that occurs through interactions with others across the lifespan.

Transitive Inference

A form of logical reasoning that allows one to deduce a relation between two items based on their relations to a third item.

Seriation

The cognitive ability to arrange objects in order by size, location, or another attribute, a skill that develops in early childhood.

Abstract Reasoning

The process of thinking about things that are not physically present, focusing on patterns and relationships.