MATSEC AM Accounting Practice Questions - Malta Advanced Matriculation (AM) Accounting - AM 01 (2026) Exam

Which situation BEST illustrates the prudence concept?

Recognising an allowance for expected credit losses on trade receivables while not recognising unrealised gains on inventory Always choosing the highest possible asset valuation Ignoring all future losses until cash is paid Capitalising research costs because they might lead to future products

Correct Answer:

Recognising an allowance for expected credit losses on trade receivables while not recognising unrealised gains on inventory

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