Unrealised Profit on Stock

TAKE EG. A SOLD GOODS TO B @ 20% G.P. RATE . OF THESE GOODS UNSOLD WERE AMOUNTING TO Rs. 20,000

then profit on unsold stock= 20% of 20,000 i.e, Rs.4,000

the entry is

G/W Dr.                     4,000

TO STK. RESERVE           4,000

the speicifed stock reserve entries will be pass only in first case, when purchasing company sold good to the vendor company. this becoz at the time of taking over the stock of the vendor company, purchasing company has to remove the profit maked at the time of sale to vendor company.

yes vineet is right

why should i treat it as unrealised profit ?

while selling i am paying excise, vat and even i have paid income tax on the profit on account of such sale and even the amalgamating company will purchase and take cenvat credit and reduce income tax effect on that account.

AND

Even case of pooling of interest method the stock reserve have to be created?

If we think logicall we shall apply the principle of valuation of inventory, market price or cost price whichever is less, to  value the goods received back by the seller company on amalgamation.  This is the reason we treat the difference between cost and market price as unrealised profit.

Wat jral entry pased to cancel unrealised profit in stock

well, it is passed in case of unrealised profits being included in the unsold stock of purchasing company and such stock was earlier purchased from vendor company and entry is 

goodwill ac dr

to stock ac