What is prudent concept in accounting

It helps in minimizing losses.Prudence concept helps to ensure that such bias is countered by requiring the exercise of caution in arriving at estimates and the adoption of accounting policies.The accounting prudence concept can also be helpful if there are certain liabilities of a company that are very likely to occur, but not certain.This concept helps to make sure that the company's financial statements illustrate the true and fair view of its assets, liabilities, revenues and expenses.These are the set of basic rules, laws, regulations, and assumptions which are kept in mind when entering a transaction in accounts books.This conservatism concept states that the entity needs to prepare and maintain its book of accounts on a prudent basis.

The prudence principle of accounting is essentially the policy of playing it safe. according to the principle, current assets are valued at cost or market price, whichever is less.The concept advises that the final accounts of a company must always show caution while reporting any figures specifically impacting the income and expenses.It is required by accountants regardless of whether it is included in the framework or not.Under the prudence concept, do not overestimate the amount of revenues recognized or underestimate the amount of expenses.Prudence is a fundamental accounting, which is the base for the financial statements.