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How is inventory valued in a partnership firm?
How is inventory valued in a partnership firm?
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Practice Questions
1 question
Q1
How is inventory valued in a partnership firm?
At cost or market value, whichever is lower
At market value only
At cost only
At replacement cost
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Inventory in a partnership firm is valued at cost or market value, whichever is lower, in accordance with accounting principles.
Questions & Step-by-step Solutions
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Q: How is inventory valued in a partnership firm?
Solution:
Inventory in a partnership firm is valued at cost or market value, whichever is lower, in accordance with accounting principles.
Steps: 7
Show Steps
Step 1: Understand what inventory is. Inventory refers to the goods and materials a business holds for sale or production.
Step 2: Know that in a partnership firm, inventory needs to be valued for accounting purposes.
Step 3: Learn about the two methods of valuing inventory: cost and market value.
Step 4: Cost is the total amount spent to acquire or produce the inventory.
Step 5: Market value is the current price at which the inventory can be sold in the market.
Step 6: According to accounting principles, inventory should be valued at the lower of cost or market value.
Step 7: This means you compare the cost and market value of the inventory and choose the smaller amount for accounting.
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