An accounting cushion refers to creating a margin of safety in financial reporting by slightly understating income or overstating expenses.

It is done to:

Avoid showing overly high profits

Prepare for possible future losses

Reduce the risk of sudden negative results

This approach is linked to the prudence (conservatism) concept in accounting.

However, excessive use of an accounting cushion may distort the true financial position.

In simple terms, an accounting cushion means keeping a safety margin in accounts to protect against future uncertainties.