Concept:Prudence guides accountants to avoid overstating income and profit in financial statements.
Explanation:Under the prudence concept, expenses and losses are recognised as soon as they are foreseen.
However, revenues and profits are recorded only when they are reasonably certain of being realised.
This conservative approach stops businesses from overvaluing assets or ignoring anticipated losses.
Since profit equals income minus expenses, recognising all probable losses keeps the reported profit accurate and not overstated.
The concept does not allow creating hidden reserves; it merely ensures that financial statements are not overly optimistic.
Therefore, prudence directly prevents the overstatement of profits in the books of account.
Answer:C. prudence