Question: a) The IASB's Framework Conceptual Framework for Financial Reporting requires financial statements to be prepared on the basis that they comply with certain accounting concepts,

a) The IASB's Framework Conceptual Framework for Financial Reporting requires financial statements to be prepared on the basis that they comply with certain accounting concepts, underlying assumptions and (qualitative) characteristics. Five of these are:

Matching/accruals

Faithful representation

Prudence

Comparability

Materiality

Briefly explain the meaning of each of the above concepts/assumptions.

(b) For most entities, applying the appropriate concepts/assumptions in accounting for inventories is an important element in preparing their financial statements. Required: Illustrate with examples how each of the concepts/assumptions in (a) may be applied to accounting for inventory.

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