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.