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Question

Market price or actual cost, whichever is less, is the generally accepted accounting principle for valuation of___________.

A
Stock-in-trade
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B
Fixed assets
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C
Current assets
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D
All of these
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Solution

The correct option is A Stock-in-trade

As per AS-2, Valuation of inventories (stock-in-trade) prescribed the accounting treatment for inventories and sets the guidance to determine the value at which the inventories are carried in the financial statement.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs.

The cost of inventories should comprise all costs of purchase, Costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

As per AS-2, "Inventories should be valued at the lower of cost and net realisable value."


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