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Question

Valuation of stocks is done by a business firm at cost price or market price, whichever is lower basis, under
  1. Convention Of Full Disclosure
  2. Convention Of Materiality
  3. Convention Of Consistency
  4. Convention Of Conservatism


Solution

The correct option is D 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.

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