valuation of crops at market value- state the accounting concept applied here
Hi Devika
It should be: Valuation of crops at lower of cost price and market value
In such a case, conservatism principle is applied; it states that we should not overstate the assets and understate our liabilities.
Suppose the market price of crops is Rs 4,000 while the cost incurred in manufacturing those crops is Rs 5,000. Therefore, when conservatism (prudence) principle is followed, the crops will be valued at market price (being lower than the cost price), so that, the assets are not overstated.
Hope this clarifies your doubt!
It should be: Valuation of crops at lower of cost price and market value
In such a case, conservatism principle is applied; it states that we should not overstate the assets and understate our liabilities.
Suppose the market price of crops is Rs 4,000 while the cost incurred in manufacturing those crops is Rs 5,000. Therefore, when conservatism (prudence) principle is followed, the crops will be valued at market price (being lower than the cost price), so that, the assets are not overstated.
Hope this clarifies your doubt!