A businessperson purchased goods for Rs.25,00,000 and sold 80% of such goods during the accounting year…
Conservatism requires recognition of the decline in the value of closing inventory. The unsold goods cost Rs. 25,00,000 × 20% = Rs. 5,00,000, exceeding their market value of…
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A businessperson purchased goods for Rs.25,00,000 and sold 80% of such goods during the accounting year ended 31st March 2023. The market value of the remaining goods was Rs.4,00,000. He valued the closing stock at cost. He violated the concept of :
Answer and explanation
Correct answer D
Conservatism requires recognition of the decline in the value of closing inventory. The unsold goods cost Rs. 25,00,000 × 20% = Rs. 5,00,000, exceeding their market value of Rs. 4,00,000, so retaining cost overstates inventory by Rs. 1,00,000.
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Kerala SET (LBS Centre)