Question

Q.closing stock is valued at lower of cost or realisable value,which principle of accounting is applied here.

Answer 1

The accounting principle of conservatism is applied here.

This principle states that assets must be recorded at lower of cost or net realisable value in order to account for uncertainty and possible losses in future.

Future problems include over supply, price fall, obsolence of stock etc.

This is also called as principal of prudence because it saves a business firm from future losses.

Answer 2

Answer:

The accounting principle of conservatism is applied here. This principle states that assets must be recorded at lower of cost or net realisable value in order to account for uncertainty and possible losses in future.

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