Question

The accounting policy for inventory of an enterprise discloses that inventories are valued at lower of cost determined on weighted average basis or net realizable value, is the application of _________ concept.

• A. Prudence
• B. Materiality
• C. Substance over form
• D. All of the above

Answer 1

The correct option is A Prudence

The prudence concept is basically conservatism. This concept makes sure that, the assets and incomes of the business are not be overstated and the liabilities and expense are not understated. Inventories valued on cost or the net realizable value, whichever less, is one of the example of prudence concept.