Conservatism, also known as the principle of prudence, is a fundamental concept in financial accounting that guides accountants to exercise caution and sound judgment while recording and reporting financial information. It ensures that uncertainties and risks inherent in business activities are adequately reflected in financial statements. According to this principle, anticipated losses and liabilities should be recognized as soon as they are reasonably foreseeable, whereas gains and revenues should only be recorded when they are realized or assured. This approach prevents the overstatement of financial position and performance and enhances the reliability of accounting information. The conservatism principle plays a crucial role in dealing with uncertainty. In business, many transactions and events involve estimates, such as doubtful debts, inventory valuation, depreciation, and contingent liabilities. Conservatism requires that when there is a choice between two alternatives, the accountant should select the one that results in lower profits or lower asset values. For instance, inventory is valued at the lower of cost or net realizable