What is prudence concept?

What is prudence concept?

The prudence concept is very much relevant in the situation when management needs to take a decision in the situation of uncertainty. Uncertainty require an estimates and management must follow the following rules when making such estimates

1.      Assets are not overstated

2.      Income are not overstated

3.      Liabilities are not understated

4.      Expenses are not understated

Head	Decision/Care
Assets and income	Not overstated
Liabilities and Expenses	Not understated