Explain how the prudence concept might be applied to: (i) The valuation of inventory. (ii) The valuation of receivables. (iii) The valuation of shares held as investments quoted...

i) Valuation of inventory
Based on prudence, the accounting standard states that inventories should be valued for the
purposes of the financial statements at cost or net realisable value, whichever is lower.
ii) Valuation of receivables
Receivables are normally reported at their net realizable value, which is the amount the
company expects to receive in cash.
iii) Valuation of shares held as investments quoted on securities exchange
The shares should be valued at the current market value and should be valued at their
cost since this will be violating the prudence concept.
iv) The valuation of land and buildings
Based on prudence, land and buildings should be valued for the purposes of the financial
statements at cost or market value, whichever is lower.

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Kavungya answered the question on May 15, 2019 at 12:30