• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

June 2025 ACCA Exams

How was your exam? Comments & Instant poll >>

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for September 2025 exams.
Get your discount code >>

Realized and unrealized

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Realized and unrealized

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • April 16, 2024 at 7:35 pm #704194
    AlinaaF
    Participant
    • Topics: 31
    • Replies: 17
    • ☆

    1. Is it true that prudence concept is when the profits are realized only when cash is received otherwise not; but losses are realized only when they are incurred?

    2. Could you please explain if realization really depends upon when the cash is received because we follow the accruals concept which is unlike the cash accounting so why do we see when the cash is received?

    3. Realized is when the money is received?

    4. Unrealized is when the loss is incurred?

    5. Could you please also explain what does prudence mean in accounting?

    April 17, 2024 at 6:57 am #704203
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54680
    • ☆☆☆☆☆

    The prudence concept does not relate to whether cash has been received or not.

    We should only bring in revenue that has been earned during the period (not future revenue that we are hoping to make). So when we make a sale, we record it.

    We should record future losses as soon as we expect they will happen. So, for example, if we think that there is a danger that a receivable will not pay we should create an allowance for receivables and therefore charge the expense immediately.

    Prudence means that we should not overstate our income and assets, and that we should not understate our expenses and liabilities.

    April 18, 2024 at 6:04 am #704240
    AlinaaF
    Participant
    • Topics: 31
    • Replies: 17
    • ☆

    In prudence concept we record revenue in the same year when they are earned and expenses in the same year when they are incurred which I get it…

    BUT isn’t it true that in prudence concept profits are recorded only when the asset is sold and money is received which is the reason for valuing inventory at cost but expenses are recognised when they are incurred regardless when cash is paid which is reason for valuing inventory at NRV ???

    Secondly, isn’t prudence concept and accrual accounting is the same thing!?

    April 19, 2024 at 8:49 am #704283
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54680
    • ☆☆☆☆☆

    Certainly the valuation of inventory at the lower of cost and net realisable value is one application of the prudence concept. Also the accruals concept is an application of it as well.

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

Donate
If you have benefited from our materials, please donate

ACCA News:

ACCA My Exam Performance for non-variant

Applied Skills exams is available NOW

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

ACCA CBE 2025 Exams

How was your exam, and what was the exam result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Donate

If you have benefited from OpenTuition please donate.

PQ Magazine

Latest Comments

  • manahylilyas on The financial management environment – ACCA Financial Management (FM)
  • poojam on Objective of financial reporting – ACCA Financial Reporting (FR)
  • mm3677 on IAS 16 Accounting for a revaluation – CIMA F1 Financial Reporting
  • Anastesia123 on MA Chapter 1 Questions Accounting for Management
  • John Moffat on MA Chapter 26 Questions Variance Analysis

Copyright © 2025 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in