A trader purchases goods for Rs. 2500000, of these 70% of goods were sold during the year. At the end of 31st December 2009, the market value of such goods were Rs. 500000. But the trader recorded in his books for Rs. 750000. Which of the following concept is violated.
A)Money measurement
B)Conservatism
C)Consistency
D)None of these

Question

Quizplus · Accepted Answer

The trader violated the conservatism principle by recording the goods at a higher value (Rs. 750000) than their market value (Rs. 500000). The conservatism principle advises that potential expenses and liabilities should be recognized immediately, but potential revenues only when they are realized. Recording assets at a value higher than the market value goes against this principle.

A Trader Purchases Goods for Rs