Answer to Question #196043 in Other for Millicent

Question

What accounting rule is applied when a receivables allowance is created?

Select one:

a. Prudence

b. Historic cost

c. Going concern

d. Business entity

Answer 1

Prudence is a policy of anticipating possible future losses but not future gains. In accounting, it states that when choosing between two solutions, the one that will be least likely to overstate assets and income should be selected. Thus receivables allowance account for doubtful debts.