VALUATION OF STOCK

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devang doshi (Querist)
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11 March 2010 ONE YEAR MARKET VALUE OF STOCK IS RS. 8 & COST IS RS. 10. SO WE VALUE THE CLOSING STOCK IN FINAL ACCOUNT IS RS. 8.

NOW IN SECOND YEAR THE SAME STOCK IS PENDING. & THE MARKET VALUE OF THE SAME IS RS. 12.

CAN WE VALUE THE STOCK AT RS. 8
BECAUSE NOW AT SECOND YEAR THE VALUE OF RS. 8 IS BECOME OUR COST & VALUATION IS ON COST OR MARKET VALUE IS LOWER.

CA Robin Betala

CA Robin Betala (Expert)
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11 March 2010 Hi devang

My answer on your query that you should value your stock in second year at Rs 10
as this is your cost of stock and the market value is Rs 12

Therefore youi should value it at rs 10

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devang doshi

devang doshi (Querist)
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12 March 2010 sir,

is income tax department allow me to value the stock at rs. 8.00 ?
is it mendatory to value the stock at rs. 10.00 only ?

as it is very hard to remember our main cost & also market price ?

in addition as when the market price of the stock is once go down, we can argue to IT dept. that it is not worthy to raise the price related to such stock ? as it is not so reliable to fetch rs. 10 in future.

Madhusudan Bohra

Madhusudan Bohra (Expert)
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13 March 2010 Stock is valued at lower of cost or net realisable value.

As per IAS -2 Cost is defined as sum of all cost of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition.

Cost in your case will remain Rs. 10

Since market value is Rs. 12, stock needs to be valued at Rs. 10

However, it can be argued that since the stock is more than one year old and it will not fetch Rs. 10 valuaton and hence Rs. 8 looks to be real value of the stock and hence it can be value at Rs. 8

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