Question

It is given that the cost of stock is Rs. $100$. However, its market price is Rs. $98$ (buying) and Rs. $140$ (selling). If the market price is interpreted in the sense of replacement cost, the stock should be valued at _______.

• A. Rs. $98$
• B. Rs. $100$
• C. Rs. $140$
• D. Rs. $40$

Answer 1

The correct option is A Rs. $98$

Stock at the end of the year is valued at cost or net realizable/market value whichever is less. This is based on the concept of conservatism where all the anticipated losses are booked in the books of account.

In the given case, the cost is Rs.100 and the market value is Rs.98, hence stock should be valued at Rs.98.