The Statement Relating to the Lower of Cost and Net

question 56

Multiple Choice

The statement relating to the lower of cost and net realisable value rule that is untrue is which of the following?

• A) It results in probable losses being recorded in the period when they are first noticed rather than when the sale occurs.
• B) The rule is based on the accounting principle of conservatism (prudence).
• C) The gross profit reported in the period when the rule is applied is higher than it otherwise would be.
• D) The rule is applied separately to each item of inventory or to groups of inventory items.

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Definitions:

Popular Democracy

A form of governance where the power lies directly in the hands of the people, typically exercised through voting and participation in policy-making.

Epistemological

Relating to the theory of knowledge, especially with regard to its methods, validity, and scope, and the distinction between justified belief and opinion.

Interpretation

The process of explaining or understanding the meaning of something, often used in contexts of law, literature, art, and data analysis.

Elite Democracy

A model of democracy in which a small number of people, usually those who are wealthy or well-educated, influence political decision making.