In applying the faithful representation principle, an accountant should choose the most realistic value available, so that the inventory value is not overstated.

Question

Quizplus · Accepted Answer

The faithful representation principle requires that financial information reflects the economic substance of transactions, rather than simply their legal form. This means that an accountant should choose the most realistic value (usually the lower of cost or market value) for inventory, so that it is not overstated on the financial statements.

In Applying the Faithful Representation Principle, an Accountant Should Choose