Valuation of Stock

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Somebody (Querist)
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24 March 2008 The closing stock of traders is valued at cost or market price, whichever is lower. I want to know that what is the meaning of “cost price” for any item which remains unsold in the second consecutive year. Is it same the price at which it was valued at the end on the preceding year (as it is the input cost for the current year), or the actual cost incurred in the preceding year.
Kindly suggest that which is the cost price of share of a company XYZ.
(A) Actual cost in Financial Year 2005-06 : Rs. 10,000/-
(B) Market price on 31-3-06 : Rs.6,000/- (considered as the value of closing stock and brought forwards in the Fin Yr 2006-07).
The item remains unsold in Fin Yr 2006-07.
(C) Market price on 31-3-07 : Rs.8,000/-.
What should be considered as Cost Price while valuation of closing stock as on 31-3-2007 : (A) Rs.10,000/- or (B) Rs.6,000/-.

pushpendra

pushpendra (Expert)
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24 March 2008 Rs. 8000/- if you are valuing at the cost or market price whichever is lower.

Somebody

Somebody (Querist)
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24 March 2008 You mean that the actual cost two or three years ago shall be considered as cost and not the value of opening stock.

CA Praveen Chopra

CA Praveen Chopra (Expert)
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24 March 2008 Mr.pushpendra is correct.Valuation of closing stock is to made independently each year.

Somebody

Somebody (Querist)
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24 March 2008 Thanks. Wonn't it cause cumbersome practice of checking the vouchers of earlier years.

pushpendra

pushpendra (Expert)
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25 March 2008 In the era of computer accounting this is not a problem.

Mandeep Singh

Mandeep Singh (Expert)
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25 March 2008 Actual cost or market price whichever is lower that means it is to be valued on 8000

Vikas Garg

Vikas Garg (Expert)
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25 March 2008 Stock is to be valued at Rs 8000/-. So as all other people have told u. Lower of cost price or market value.

CA. Kirti S. Ganatra

CA. Kirti S. Ganatra (Expert)
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25 March 2008 Cost will be always 10000/- compare with MP which ever less will be Closing Stock

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