Multiple choice

When stock is valued at cost in one accounting period and at lower of cost and net realisable value in another accounting period

  1. prudence principle conflicts with consistency principle

  2. matching principle conflicts with consistency principle

  3. consistency principle conflicts with accounting period assumption

  4. none of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The prudence principle requires cautious valuation (lower of cost and NRV). The consistency principle requires using the same method across periods. When you value stock at cost in one year and at lower of cost and NRV in another, you're applying prudence but violating consistency. The two principles conflict in this situation - you must choose which to prioritize.

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