Define: Prudence

Prudence
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 of Prudence
  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
Also: 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.

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This glossary post was last updated: 28th March, 2024.

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