Question

Valuation of stocks is done by a business firm at cost price or market price, whichever is lower basis, under

• A. Convention Of Full Disclosure
• B. Convention Of Conservatism
• C. Convention Of Materiality
• D. Convention Of Consistency

Answer 1

The correct option is B Convention Of Conservatism

In accounting, the convention of conservatism, also known as the doctrine of prudence, is a policy of anticipating possible future losses but not future gains. Hence, valuation of stocks is done by a business firm at cost price or market price, whichever is lower.