Accounting Objective Question:

Which statement accurately reflects the impact of the principle of Prudence on financial reporting and the treatment of uncertainties and risks in accounting practices?

A$)$ Prudence encourages understating assets and overstating liabilities to present a conservative financial position.

B$)$ Prudence advocates for recognizing gains when realized and losses when probable, ensuring a realistic depiction of financial performance.

C$)$ Prudence disregards uncertainties and risks, leading to a biased representation of financial statements.

D$)$ Prudence promotes aggressive accounting practices, resulting in inflated revenue figures and understated expenses.