Accounting · Process Costing

A process manufacturing firm faces regular Inter-Process Profit transfer issues. Assess the following statements concerning the necessary accounting adjustments for this practice: I. The fundamental reason for the adjustment is to prevent the closing stock of the final process from being valued at more than its true cost, thus violating the conservatism principle. II. The adjustment is made by creating a Stock Reserve account for the full amount of the unrealized profit included in the closing stock of each preceding process. III. The necessary adjustment only affects the Profit and Loss Account and does not impact the value of the stock shown in the Balance Sheet. Which of the statements given above are correct?