Under which accounting principle are estimates and assumptions often used to prepare financial statements?

The correct choice is based on the concept that estimates and assumptions are essential in the preparation of financial statements when precise numbers are not available. The Estimation Principle acknowledges that certain accounting figures, such as depreciation expense or bad debt expense, must often be based on estimates and assumptions due to the inherent uncertainties in predicting future events.

Applying estimates allows accountants to present a fair and accurate picture of a company's financial position, despite the lack of complete information. This principle is crucial for recognizing expenses and revenues in the appropriate periods and ensuring that financial statements reflect the company's operations accurately. It emphasizes that while exact figures may not always be attainable, reasoned estimates provide valuable insights into a company’s financial health.

In contrast, the other principles mentioned do not focus directly on the use of estimates and assumptions. The Conservatism Principle advises caution in recognizing revenues and requires expenses to be recognized sooner, but it does not specifically address the need for estimates. The Materiality Principle deals with the relevance of information and whether it will impact decision-making, while the Full Disclosure Principle mandates that all material information should be disclosed in the financial statements but does not directly govern the use of estimates in the financial reporting process.