Q.The rule of stock valuation 'cost price or market value whichever is lower' is based on the accounting principle of:

The 'cost or market price whichever is lower' rule for stock follows the convention of Conservatism (Prudence), so the answer is option (c).

Why conservatism?

• The convention of conservatism says: anticipate no profit, but provide for all possible losses.
• If market value falls below cost, the fall is a probable loss, so stock is shown at the lower market value. If market value rises above cost, the extra is only an anticipated (unrealised) profit, so it is ignored and stock stays at cost.

Why not the others? …