Question

If market price of closing stock is also known while preparing Consignment A/c, then :

• A. Closing Stock is to be valued at cost
• B. Closing Stock is to be valued at market price
• C. Closing Stock is to be valued at cost or market price, whichever is higher
• D. Closing Stock is to be valued at cost or market price, whichever is lower

Answer 1

The correct option is D Closing Stock is to be valued at cost or market price, whichever is lower

Using the principle of prudence, the valuation of closing stock is done by taking the market price or cost whichever is lower. So, if the market price of closing stock is also known while preparing a consignment account, the closing stock is to be valued at cost or market price, whichever is lower.