In them are against credit such as in the

    In today’s world, companies use
accounting information to conduct a financial analysis of their companies’
operations. Accounting information can be categorized in two types of
characteristics, the quantitative and the qualitative characteristics. Quantitative
characteristics are
about the estimation of
financial transactions. Qualitative characteristics are about the shareholders perceived importance of financial
information .Companies require
financial information when they making decisions and to do that  accountants need to use  specific
methods  and concepts ,one of this
concepts is the prudence concept and that’s what I am going to discuss in the
following paragraphs.

  In his book
Arnold, J. (1994) wrote about the practical Framework and the four essential concepts
related to financial reporting. The first concept is the going concern concept,which
stipulatesthat an organization will stay in business for the  predictable future and it also implies that
the organization won’t  be enforced to neither stop operations nor liquidate
its assets at what may be very low fire-sale rates .By making this assumption,
accountants are justified in delaying the recognition of specific expenses
until a later period, when the organization will probably still be in business
and using its assets in the most effective way. The second concept is the
accruals or the matching concept. This concept is related to an
accounting practice through which firms recognize revenues and expenses in
the same accounting period. Firms report revenues, that
is, along with the expenses. The purpose of the matching concept is
to avoid misstating earnings for a given period. Hence, the
accountant reports revenues in specific a period without reporting all the
expenses and   the result of this action
is overstated the profits. For instance,
when a company makes sales, the majority of them are against credit such as in the case of customers receiving delivery
of goods yet promising to make the payment, within 30 days. According to the revenue
recognition principle, revenue is recognized when the delivery is made. There
is however the risk that the customers may not pay the amount due against those
sales, which results in the company writing off the account receivable as bad
debts expense. The possibility of bad debts exists when the sale is made, so
expense should be recognized right at that moment when the sale is made.
Recognizing bad debts expense requires considerable time and effort. 

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