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Question

Closing stock is valued at ___________.


A
Market price
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B
Cost price
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C
Cost price or market price whichever is lower
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D
Cost price or market price whichever is higher
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Solution

The correct option is C Cost price or market price whichever is lower
Accounting is based on certain concepts and conventions. One of the convention 'conservatism " defines that firm should make a provision for all future losses while making the financial statement. On this concept only, stocks are valued at cost or market price whichever is lower.

Principles and Practice of Accounting

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