"closing stock is valued at higher of cost or realizable value "which principle of accounting is voilated here ?
Dear Student,
'Principle of Prudence' is violated here.
It states that “One shall not anticipate profit but shall always provide for all prospective losses”. This makes sure that the assets and incomes are not overstated, while liabilities and losses are not understated. Due to which closing stock is always valued at lower of cost and market price. Also, provision for bad and doubtful debts are maintained because of this principle.
Keep posting!!
'Principle of Prudence' is violated here.
It states that “One shall not anticipate profit but shall always provide for all prospective losses”. This makes sure that the assets and incomes are not overstated, while liabilities and losses are not understated. Due to which closing stock is always valued at lower of cost and market price. Also, provision for bad and doubtful debts are maintained because of this principle.
Keep posting!!