Accounting for IGCSE & O level - Advanced Principles (Section 2 - No. 49)

The principle of prudence is closely related to which idea?

Optimism in recognizing profits.

Understating assets to show financial strength.

Recognizing potential losses, but not potential gains.

Aggressively pursuing sales targets.

The prudence principle promotes caution and conservatism, including recognizing potential losses but not potential gains.