The valuation of inventories may be on the basis of:
A) the lower of direct cost and recoverable amount.
B) regular revaluations by classes of inventories undertaken at the end of the period.
C) the weighted average of market value and absorption cost over the period.
D) the lower of cost and net realisable value.

Question

Quizplus · Accepted Answer

The most commonly used basis for inventory valuation is the lower of cost and net realisable value, which means the inventory is recorded at the lower value of its cost or net realisable value. Cost refers to the cost of generating or acquiring inventory, while net realisable value is the estimated selling price less any selling expenses. This method of valuation ensures that inventory is not overstated in the financial statements, which could lead to misleading financial analysis and decision-making.

The Valuation of Inventories May Be on the Basis Of