Activity 2 A customer has filed a suit against a trader who has supplied poor quality goods to him. It is known that the court judgment will be in favour of the customer and the trader will be required to pay the damages. However, the amount of legal damages is not known with certainity. The accounting year has already been ended and the books are now finalised to ascertain true profit or loss. The accountant of the trader has advised him not to consider the expected loss on account of payment of legal damages because the amount is not certain and the final judgment of the court is not yet out. Do you think the accountant is right in his approach. 
 

NOPE. according to the principle of Prudence or Conservatism all expected losses are to be accounted for and we need to ignore all possible profits.
This is the reason closing stock is values at cost price or selling price qgich ever among them was lower

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yes the accountant is right ..
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bdz
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