Multiple choice

Directions: Choose the correct option for the given question.

According to the Accounting Standard (AS)-2, the inventory is to be valued at which of the following?

  1. Actual cost or sales value, whichever is lower

  2. Historical cost

  3. Net realizable value

  4. Historical cost or net realizable value, whichever is lower
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

AS-2 (Accounting Standard 2) governs inventory valuation and prescribes the lower of cost or net realizable value rule. Historical cost represents acquisition cost, while net realizable value is estimated selling price minus completion costs. This conservative principle prevents inventory overvaluation.

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