A business firm creates provisions against doubtful debt under which of the following conventions

Convention of Full Disclosure

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Convection of Materiality

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Convention of Conservatism

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Convention of Consistency

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Solution

The correct option is C
Convention of Conservatism

According to Convention of conservatism, you should record expenses and liabilities as soon as possible, but to record revenues and assets only when you are sure that they will occur.

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Which of the following is the effect on net income, if a business creates a provision for doubtful debts?

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