During the preparation of the Toys4U Company's financial statement, one of the accountants has to decide between two alternative methods of valuing Inventory. He decides to choose the method that reports the highest amount. Which constraint did the accountant follow? Cost Effectiveness Constraint Recognition Constraint Materiality Constraint Conservatism Contraint

Question

During the preparation of the Toys4U Company's financial statement, one of the accountants has to decide between two alternative methods of valuing Inventory. He decides to choose the method that reports the highest amount. Which constraint did the accountant follow? Cost Effectiveness Constraint Recognition Constraint Materiality Constraint Conservatism Contraint

Answer 1

### Materiality Constraint

Answer 2

## Step 1: Understand the inventory valuation constraint### Different inventory valuation methods can affect the financial outcomes. Choosing the highest amount impacts reported earnings and financial position.## Step 2: Align with the correct constraint### The accountant needs to decide based on the method that shows maximum reporting. This is not about direct cost-efficiency, recognition, or materiality.## Step 3: Recognize conservatism### Conservatism constraint advises using the more conservative approach but this points to the opposite – showing higher amounts, which directly opposes conservatism.

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