Accounting for inventories by applying the lower-of-cost-or-market is an example of the application of
A) conservatism.
B) comparability.
C) consistency.
D) materiality.

Question

Quizplus · Accepted Answer

The lower-of-cost-or-market method is a conservative approach because it values inventories at the lower of their cost or market value, which results in a more cautious approach to reporting inventory amounts. This method helps ensure that inventories are not overstated on the balance sheet.

Accounting for Inventories by Applying the Lower-Of-Cost-Or-Market Is an Example