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Accounting standards

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Querist : Anonymous

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Querist : Anonymous (Querist)
29 May 2012 According to AS-2--> Inventories should be valued at the lower of cost and net realizable value.
What is the logic behind this ??

Thanx in advance
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CA Ajay Wadhwani

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CA Ajay Wadhwani (Expert)
29 May 2012 Dear Friend,

Inventory should be valued at cost or NRV whichever is lower because we can not account for unrealized gain but we account for unrealized loss, it conservatism principle of accounts.
Accounting conservatism will recognize all probable losses as they are discovered and most expenditures as they are incurred. Revenue will be deferred until it is verified
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