Explanation
The valuation of inventory should be based on prudence concept of accounting. This concept states that if the net realizable value of inventory is lower than its original cost, then it should be valued at its net realizable value. On the contrary, inventory should be shown at cost price. This means inventory should be valued at lower of cost or net realizable value.
The amount of capital in the business is not fixed but changes in the normal course of business. It's increased by any profit or income earned and decreased by any drawing, loss, or expense made. The wages being paid in cash decreases cash and capital of the business as it is an expense. Hence, option (d) is correct.
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