The provision for discount on debtors is often provided in keeping with the concept of _______________.

Conservatism

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Going Concern

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Materiality

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Consistency

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Solution

The correct option is B Conservatism
Conservatism:
This convention ensures that uncertainties and risks inherent in business transactions should be given a proper consideration. As per this convention the accountants follow the rule 'anticipate no profit but provide for all possible losses'. Examples Making provisions for Bad Debts, Making General Reserve, Valuing the stock at lower of cost or market value etc.

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Similar questions

Q. While preparing final account, to make provision for discount on debtors. which of the following adjustment entry will be passed?

Provision for Discount on Debtors A/c To Debtors A/c	Dr.
Profit & Loss A/c To Provision for Discount on Debtors A/c	Dr.
Provision for Discount on Debtors A/c To Trading A/c	Dr.
Debtors A/c To provision for Discount on Debtors A/c	Dr.

What is the reason for the creation of a provision for discount on debtors?

In case of actual discount when provision for discount on debtors is made, the discount account is debited with a corresponding credit in _____account.

Q. A Trial Balance contains the following information :

Bad debts	Rs.5,000
Discount allowed	Rs.4,000
Provision for discount on debtors	Rs.2,000
Provision for Doubtful Debts	Rs.5,000
Sundry Debtors	Rs.50,000

At the end of the year, it is desired to maintain a provision for debts at Rs. 4,000 and provision for discount on debtors at Rs.2,000. Sundry Debtors (after provision) will appear in the Balance Sheet at a figure of :

By providing for discount on debtors and making provision for doubtful debts, which accounting concept is followed?

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