GENERAL KNOWLEDGE

Detailed explanation-1: -It is valued at Cost price or Realisable Value, whichever is less. It is based on the principle of Conservatism or prudence, According to which all anticipated losses should be recorded in the books of accounts, but all anticipated or unrealized gains should be ignored.

Detailed explanation-2: -Generally, the inventory of a firm should be valued at the lower of cost or net realizable value. This principle comes from the conservative system of accounting. So the principle basically states that we must value the inventory either at the cost of the inventory or at its net realizable value.

Detailed explanation-3: -The conservatism principle is the foundation for the lower of cost or market rule, which states that you should record inventory at the lower of either its acquisition cost or its current market value.

Detailed explanation-4: -The conservatism principle is the general concept of recognizing expenses and liabilities as soon as possible when there is uncertainty about the outcome, but to only recognize revenues and assets when they are assured of being received.