Conservatism is the basic accounting principle that supports the immediate recognition of a contingent loss.
The conservatism principle in accounting is the general concept of recognizing expenses and liabilities as soon as possible when there is uncertainty about an outcome. It also supports the immediate recognition of a contingent loss.
Approaching your financial statements using conservatism accounting ensures that they are prepared with caution. The aim of this concept is to protect investors from potentially inflated revenues and assets, and not involving or taking unnecessary risks.
Hence, the immediate recognition of a contingent loss is supported by Conservatism principle.
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