Inventory

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Querist : Anonymous

Querist : Anonymous (Querist)

19 April 2013 why closing stock is calculate at lower price
. I mean which ever is less in cost value and
market value.

CA. Sunil Kumar

CA. Sunil Kumar (Expert)
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20 April 2013 to ascertained that profit is not increase due to non-realizable value of inventory.

and not carry a amount in our balance sheet which is actually not represent the fair value of asset

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Querist : Anonymous

Querist : Anonymous (Querist)

21 April 2013 If cost price of any product is 10 RS And Market price is 12 than in this case , there are no profit and no loss because cost price is less - On the other hand cost price of that product is 10 And market price is 9 Rs than in this case loss is 1 Rs per unit quantity due to apply market price. So Balance sheet always represent under tally amount or equal tally amount.I want to ask that it is right or not.

Vivek Hebbar

Vivek Hebbar (Expert)
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21 April 2013 Dear Anonymous

The second question posted by you is not very clear. However, the reason for taking stock value as lesser of cost or realizable value is to follow the principle of conservatism. That is recognise the loss if the same is determined but do not recognise profit unless it is realized.