2025 · Q76
The principle of inventory valuation - "cost or net realisable value, whichever is lower" is based on:
General Accounting Principles, Auditing and InsuranceFinal accounts
- AAccrual Concept
- BMatching Concept
- CMoney Measurement Concept
- DConvention of Conservatism
Explanation
Valuing inventory at cost or net realisable value, whichever is lower, anticipates possible losses but never anticipated profits, which is the essence of the convention of conservatism (prudence). It is not an application of the accrual, matching or money measurement concepts.