Assertion (A): Under Ind AS 2, inventories are measured at the lower of cost and net realizable value (NRV). Reason (R): This ensures that assets are not overstated and losses are recognized in the period they occur, adhering to the prudence concept. Choose the correct option.
A.Both A and R are true but R is NOT the correct explanation of A
B.A is true but R is false
C.Both A and R are true and R is the correct explanation of A
Explanation:
Ind AS 2 mandates the lower of cost and NRV rule. This is a direct application of the prudence (conservatism) concept, ensuring assets aren't overstated and potential losses are recognized immediately. R correctly explains A.
Explanation:
When cash is realized in installments during dissolution, it is distributed using either the Maximum Loss Method or the Surplus Capital (Proportionate Capital) Method to ensure partners' capital accounts are correctly adjusted.
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