Ans- (a) Conservatism.
Conservatism states that the accountants should not anticipate income and should provide for all possible losses. The valuation of stock-in-trade at a "lower of cost or net realisable value" is the application of this principle.
Here, cost price is Rs 500000 and net realisable value(market value) is Rs 750000.
Applying the principle of Conservatism (i.e, lower of cost of net realisable value) the value of stock-in-trade is Rs 500000