The prudence concept is one of the fundamental accounting concepts. It is important that financial statements are prepared on a prudent basis. Revenue must not be shown in the accounts until the cash realisation of the revenue is reasonably certain. On the other hand, costs arising as a result of past actions should be provided for immediately, even if the cash will not be paid over until the future.


reference: Business Studies / Accounting. Accounts & Finance Glossary. Jim Riley BA(Hons) MBA FCA // tutor2u