Which of the following is NOT a convention followed in preparation of financial statements?

None of the above

The correct answer is option 4- None of the above.

Certain accounting conventions are followed while preparing financial statements. There are four widely recognized accounting conventions: conservatism, consistency, full disclosure, and materiality. The convention of valuing inventory at cost or market price, whichever is lower, is followed. The valuing of assets at cost less depreciation principle for balance sheet purposes is followed. The convention of materiality is followed in dealing with small items like pencils, pens, postage stamps, etc. These items are treated as expenditure in the year in which they are purchased even though they are assets in nature. The stationery is valued at cost and not on the principle of cost or market price, whichever is less. The use of accounting conventions makes financial statements comparable, simple and realistic.