The Conservatism Constraint

question 194

Multiple Choice

The conservatism constraint:

• A)Requires that when more than one equally likely estimate of amounts is expected to be received or paid in the future,then the less optimistic amount should be used.
• B)Requires that a company use the same accounting methods period after period.
• C)Requires that revenues and expenses be reported in the period in which they are earned or incurred.
• D)Requires that all items of a material nature be included in financial statements.
• E)Requires that all inventory items be reported at full cost.

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Definitions:

Supply Curve

A graphical representation showing the relationship between the price of a good and the quantity of the good that suppliers are willing to sell.

Sales Tax

A tax imposed by governments on the sale of goods and services, typically calculated as a percentage of the purchase price.

Price

The amount of money required to purchase a good or service, often determined by the interaction of supply and demand.

Quantity Tax

A tax that is levied on a per unit basis, meaning a specified amount is charged for each unit of a good or service sold.