One of the basic concept of fundamental accounting is Prudence which has been a part of various studies conducted in the past. The basic concept of Prudence is that during the time of preparation of accounting information, and while making judgments regarding uncertain things like assets lives, doubtful debts or the number of claims of warranty could occur, its views should be taken into consideration. Prudence is also one of the highlighted qualitative feature of the accounting information. Information which is included in the statements must be prudent according to the Framework information.
The definition according to the Framework of Prudence is the presence of a specific degree of caution during the time of making decisions which are essential to make estimates required under the conditions of ambiguity; like expenses and liabilities are not understated and income and assets are not overstated. More focus in the past was placed on making sure that incomes and assets were not overstated. But, as prudence has been utilized in the past as a method to overstate provision or liabilities and expenses this is no longer the case especially in the time when the performance of the firm was good.