The accounting principle underpinning the inventory valuation rule 'the lower of cost and net realisable value' is:
A)prudence (conservatism).
B)historical cost.
C)matching costs with revenue.
D)going concern.

Question

Quizplus · Accepted Answer

The principle underlying the inventory valuation rule 'the lower of cost and net realisable value' is prudence, also known as conservatism. This principle requires that when valuing inventory, a business should err on the side of caution and choose the lower of the two alternatives (i.e., cost or net realisable value) in order to avoid overstating the value of its inventory on the balance sheet.

The Accounting Principle Underpinning the Inventory Valuation Rule 'The Lower