Lower of cost or market is an application of which accounting principle?
A)Consistency
B)Conservatism
C)Matching
D)Accrual Basis

Question

Quizplus · Accepted Answer

Lower of cost or market (LCM) is an application of the accounting principle of conservatism. Under conservatism, a company should always err on the side of caution and report the lowest possible value for its assets and highest possible value for its liabilities to avoid overstating its financial position. LCM requires inventory to be valued at the lower of its cost or the current market price, which demonstrates a conservative approach to valuing inventory.

Lower of Cost or Market Is an Application of Which