The premise 'do not anticipate profits but provide for all losses' refers to the Conservatism Concept (also called Prudence) in accounting. This concept is based on the policy of playing safe and guides the recording of transactions in the books of accounts.

The concept states that a conscious approach should be adopted in ascertaining income so that profits of the enterprise are not overstated. Profits should not be recorded until realised, but all losses, even those which may have a remote possibility, are to be provided for in the books of account.

For example, valuing closing stock at cost or market value whichever is lower, creating provision for doubtful debts, discount on debtors, and writing off intangible assets like goodwill and patents from the books are applications of this principle. If market value of goods has fallen, the stock is shown at cost price, but if market value has gone up, the gain is not recorded until the stock is sold.

This approach helps in dealing with uncertainty and protects the interests of creditors against an unwanted distribution of firm's assets. If profits are overstated, it may lead to distribution of dividend out of capital, which is not fair as it reduces the capital of the enterprise.

However, deliberate attempts to underestimate assets should be discouraged as they lead to hidden profits called secret reserves.