A businessman purchased goods for Rs. 25,00,000 and sold 80% of such goods during the accounting year ending on 31^st March 2005. The market value of the remaining goods was Rs. 4,00,000. He valued the closing stock at cost. Thus, he violated the concept of

The conservatism principle (prudence concept) requires that inventory should be valued at the lower of cost or market value (net realizable value). Here, remaining stock cost is Rs. 5,00,000 (20% of Rs. 25,00,000) but market value is only Rs. 4,00,000. By valuing at cost, the businessman violated conservatism, which anticipates losses but not profits.