Application of the Principle of Prudence in the Accounting of Slovak Businesses through the Creation of Adjusting Entries for Receivables

Abstract

Abstract The primary principle of accounting is true and fair view of all the facts subject to the accounting. The fair presentation is ensured through the compliance with the principle of prudence. This principle means that, at the balance sheet day the entity takes into account the expected risks and losses related to assets and liabilities; and that are known at the balance sheet date. The expected risks and losses are reflected in the accounting through provisions and adjusting entries. The adjusting entries are created when the transitional impairment of assets takes place. The paper deals with the issue of creation of adjusting entries for receivables in the Slovak enterprises in terms of taxation and accounting. The adjusting entries for receivables must be created if it is reasonable to assume that the debtor is unable to pay the full amount or part of it. We will analyse and examine the importance of adjusting entries, difficulties in creating adjusting entries for receivables and their impact on economic performance of selected companies. In the research part of the paper will be used appropriate mathematical and statistical methods and based on the results of the research evaluation conclusions and suggestions will be drawn.