1 ‘The idea that stock should be included in accounts at the lower of historical cost and net realisable value follows the prudence convention but not the consistency convention.’ Required: ( a ) Do...

1

‘The idea that stock should be included in accounts at the lower of historical cost and net

realisable value follows the prudence convention but not the consistency convention.’

Required:

(a) Do you agree with the quotation?

(b) Explain, with reasons, whether you think this idea (that stocks should be included in accounts

at the lower of historical cost and net realisable value) is a useful one. Refer to at least two

classes of user of financial accounting reports in your answer.

(Association of Chartered Certified Accountants)