"Holding gains in relation to stocks should not be used for payment of dividend." which one of the following accounting principles is involved in this?

Consistency

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Cost

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Materiality

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Realisation

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Solution

The correct option is D Realisation
Dividends can only be paid out of the profits when it has been realized in cash."
The realization concept states that any change in value of an asset shall to be recorded only when the business realizes it.
The change is not to be recorded unless there is certainty that such change will materialize.
Therefore, holding gains in relation to stocks should not be used for payment of dividends because these have not been realized in cash.

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Similar questions

List-I(Accounting concept)	List-II(Principle involved)
I. Consistency	(a) Losses are anticipated and accounted for in advance but profits are not accounted for until realised
II. Comparability	(b) All the relevant financial information should be summarised and presented in the accounting statements
III. Conservatism	(c) According procedures in an entity should be followed uniformly from period to period
IV. Disclosure	(d) Accounting statement of different periods of an entity and those of different entities of a period should be based on the same accounting principles and procedures
	(e) Personal Judgement of accountants should not influence accounting measurements

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