Question

cost or market price whichever is less represent principle of conservatism/matching concept.​

Answer 1

Answer:

conservatism

Explanation:

The principle of conservatism is suitably applicable to the LCM rule.

Conservatism in accounting means that one should choose accounting methods that are least likely to overstate assets and income.

Valuing inventory at cost when its replacement cost is lower overstated the asset merchandise inventory.

Thus, we apply conservatism principle and use LCM to reduce inventory to a more realistic value and, at the same time, recognise the loss in value that has incurred.