Question

5 Valuation of stock at lower of cost or net realisable value is an example of
(a) Consistency Convention. (b). Conservatism Convention
(c) Realisation Concept (d) Matching Concept​

Answer 1

Answer:

(b) Conservatism Convention

Answer 2

Valuation of stock at lower of cost or net realisable value is an example of (b) Conservatism Convention.

Explanation for the answer:

• According to the conservatism convention, the situation of uncertainty and doubt, the business transactions should be recorded in such a way that the profits and assets are not overstated and losses and liabilities are not understated.
• It is the convention of caution, or the policy of playing safe.
• For example: Closing stock is valued at cost price or Net realisable value, whichever is lower, Invntories should be valued at the lower of cost and net realisable value etc.
• Hence, the correct answer among all the options is option (b) Conservatism Convention.

(#SPJ2)