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Question: A businessman purchased goods for Rs. 25,00,000 and sold 70% of such goods during the accounting year ended on 31.3.2014. The market value of remaining goods was Rs. 5,00,000. He valued the closing stock at Rs. 5,00,000 and not at Rs. 7,50,000 due to: a) Money Measurement b) Conservatism c) Cost d) Periodicity

Answer: (b) Conservatism
Description: According to the concept of conservatism the current assets i.e. closing stock is valued at cost or market price whichever is lower. Thus, in the given question, goods are valued at cost i.e. 7,50,000 or market price i.e.5,00,000 according to the concept of conservatism.



Category Fundamentals of Accounting Interview Questions & Answers - Exam Mode / Learning Mode
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Question: A businessman purchased goods for Rs. 25,00,000 and sold 70% of such goods during the accounting year ended on 31.3.2014. The market value of remaining goods was Rs. 5,00,000. He valued the closing stock at Rs. 5,00,000 and not at Rs. 7,50,000 due to: a) Money Measurement b) Conservatism c) Cost d) Periodicity
Answer:

(b) Conservatism
Description: According to the concept of conservatism the current assets i.e. closing stock is valued at cost or market price whichever is lower. Thus, in the given question, goods are valued at cost i.e. 7,50,000 or market price i.e.5,00,000 according to the concept of conservatism. Source: CoolInterview.com



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