The accounting rule,"lower of cost or market," reflects
A)a logical approach to inventory valuation
B)a rational approach to inventory valuation
C)a conservative approach to inventory valuation
D)an aggressive approach to inventory valuation

Question

Quizplus · Accepted Answer

The accounting rule "lower of cost or market" is a conservative approach to inventory valuation because it values inventory at the lower of its historical cost or its current market value. This approach helps to ensure that inventory is not overvalued on financial statements, which could lead to overstatement of profits and misrepresentation of financial performance. By choosing the lower value, it is a cautious approach that protects against potential losses.

The Accounting Rule,"lower of Cost or Market," Reflects