A firm may hold stock which is heavily in demand.
Consistently, the market value of this stock may be increased.
Normal accounting procedure is to ignore this because of___________concept.

Conservation

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Revenue recognition

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Materiality

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Historical cost

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Solution

The correct option is A Conservation
A firm may hold stock which is heavily in demand. Consistently, the market value of this stock may be increased. Normal accounting procedure is to ignore this because of conservatism principle.
The convention of conservatism mean that the convention of caution, or the policy of playing safe. This principle requires that in the situation of uncertainty and doubt, the business transactions should be recorded in such a manner that the profits and assets are not overstated and losses and liabilities are not understated.

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Similar questions

A firm holds a stock which is heavily in demand. Consequently, the market value of this stock may be increasing. Normal accounting procedure would ignore this. Which concept covers this?

Note: Stock is always measured at lower of cost at which goods were purchased and the current price of those goods. (We'll study this later)

Complete the following work sheet:

(i)	If a firm believes that some of its debtors may ′default′, it should act on this by making sure that all possible losses are recorded in the books. This is an example of the ___________ concept.
(ii)	The fact that a business is separate and distinguishable from its owner is best exemplified by the ___________ concept.
(iii)	Everything a firm owns, it also owns out to somebody. This co-incidence is explained by the ___________ concept.
(iv)	The ___________ concept states that if straight line method of depreciation is used in one year, then it should also be used in the next year.
(v)	A firm may hold stock which is heavily in demand. Consequently, the market value of this stock may be increased. Normal accounting procedure is to ignore this because of the ___________.
(vi)	If a firm receives an order for goods, it would not be included in the sales figure owing to the ___________.
(vii)	The management of a firm is remarkably incompetent, but the firms accountants can not take this into account while preparing book of accounts because of ________ concept.

Complete the following worksheet

(i) If a firm believes that some of its debtors may default, it should act on this by making sure that all possible losses are recorded in the books. This is an example of the ___ concept.

(ii) The fact that a business is separate and distinguishable from its owner is best exemplified by the ___ concept.

(iii) Everything a firm owns, it also owns out to somebody. This coincidence is explained by the ___ concept.

(iv) The ___ concept states that if the straight-line method of depreciation is used in one year, then it should also be used in the next year.

(v) A firm may hold stock which is heavily in demand. Consequently, the market value of this stock may be increased. Normal accounting procedure is to ignore this because of ___

(vi) If a firm receives an order for goods, it would not be included in the sales figure owing to ___

(vii) The management of a firm is remarkably incompetent, but the firm's accountants cannot take this into account while preparing the book of accounts because of ___ concept.

Q. Statement: The regulatory authority has set up a review committee to find out the reasons for unstable stock prices.
Assumptions:
I. The investors may regain confidence in stock market by this decision.
II. The review committee has the expertise to find out the causes for volatility in the stock market.

Q. Market demand curve for "Giffen" commodities may also be considered a normal good instead because _____________.

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A firm may hold stock which is heavily in demand. Consistently, the market value of this stock may be increased. Normal accounting procedure is to ignore this because of___________concept.

A firm may hold stock which is heavily in demand.
Consistently, the market value of this stock may be increased.
Normal accounting procedure is to ignore this because of___________concept.