Define: Prudence

Business, Legal & Accounting Glossary

Definition: Prudence

Quick Summary of Prudence

A degree of caution in the exercise of the judgements needed in making the estimates required under conditions of uncertainty, such that gains and assets are not overstated and losses and liabilities are not understated.

What is the dictionary definition of Prudence?

Dictionary Definition

  1. the ability to govern and discipline oneself by the use of reason
  2. sagacity or shrewdness in the management of affairs
  3. skill and good judgment in the use of resources
  4. caution or circumspection as to danger or risk


behaviour that is careful and avoids risks:


Full Definition of Prudence

The state of being careful in the way you make decisions or spend money so that you avoid unnecessary risks:

  • The challenge we are trying to meet is balancing financial prudence with the need for success.
  • economic/fiscal prudence

In accounting

The principle of not showing assets or profits to be greater than they might be, or losses to be smaller than they might be, in a company’s accounts:

  • The prudence principle states that businesses should report their assets and liabilities in the most unfavourable position.

History and Etymology of prudence

Middle English, from Anglo-French, from the Latin term “prudentia”, an alteration of “providentia” (providence). The first known use of prudence was in the 14th century.


Examples of Prudence in a sentence

We need to exercise prudence in such matters of importance.
The firm was commended for its financial prudence.
Everyone agreed that panic wasn’t called for, however, prudence was.
She authors a personal-finance editorial that preaches fiscal prudence.
Prudence demands the conservation of as much of the current eco-system as possible.
Casinos acquire such massive profits partially because few of the people who visit them have the prudence to walk away whilst they’re still ahead.

Synonyms For Prudence

caution, discretion, care, wisdom, precaution

Cite Term

To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
Modern Language Association (MLA):
Prudence. Payroll & Accounting Heaven Ltd. April 09, 2020
Chicago Manual of Style (CMS):
Prudence. Payroll & Accounting Heaven Ltd. (accessed: April 09, 2020).
American Psychological Association (APA):
Prudence. Retrieved April 09, 2020, from website:

Definition Sources

Definitions for Prudence are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 6th January, 2020