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.

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Definitions:

Force Exerted

The interaction that causes a change in the motion of an object, quantified by Newton's laws.

Arterial Blood Pressure

The pressure exerted by circulating blood upon the walls of blood vessels, specifically within arteries, crucial for maintaining blood flow through the body.

Smooth Muscle

Type of muscle found in the walls of internal organs such as the stomach, intestines, and blood vessels, functioning involuntarily.

Arteries

Blood vessels that carry oxygen-rich blood away from the heart to various parts of the body.