How Is the Prudence Principle Applied to the Accounting for Construction

question 30

Multiple Choice

How is the prudence principle applied to the accounting for construction contracts?

• A)If a loss is expected on the contract, all of this loss is immediately recognized.
• B)Only a proportional amount of revenue and expenses are recorded each year.
• C)If a loss is expected on the contract, a loss is recognized in the current year based on the degree of completion.
• D)Under this principle, good news is reflected earlier than bad news.

---

Definitions:

Mania

A state of abnormally elevated or irritable mood, arousal, and energy levels, often associated with bipolar disorder.

Affective Disorder

A classification of mental health disorders primarily affecting mood, such as depression or bipolar disorder.

Depression

is a mental health disorder characterized by persistent sadness, loss of interest in activities, and a range of emotional and physical problems.

Agoraphobia

An anxiety disorder characterized by an intense fear of places or situations from which escape might be difficult.