The concept of conservatism will have the effect of______________?
AUnderstatement of Liabilities
BOverstatement of Assets
CUnderstatement of Assets
DOverstatement of Liabilities
Correct answer
C. Understatement of Assets
Explanation
The concept of conservatism will have the effect of understatement of assets since the financial statements are usually drawn up on rather a conservative basis. Window-dressing i.e., showing a position better than what it is, is not permitted.