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    Question

    As per accounting standards, inventory is to be valued

    at cost or net realizable value. Which of the accounting principle forms the basis of this standard? 
    A Consistency Correct Answer Incorrect Answer
    B Conservatism Correct Answer Incorrect Answer
    C Going concern Correct Answer Incorrect Answer
    D Accrual concept Correct Answer Incorrect Answer
    E Matching concept Correct Answer Incorrect Answer

    Solution

    According to the Conservatism (Prudence) principle, expected losses should be recorded but gains should not. Hence, inventory is valued at lower of cost or net realizable value to avoid overstating assets.

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