24 March 2008
The closing stock of traders is valued at cost or market price, whichever is lower. I want to know that what is the meaning of “cost price” for any item which remains unsold in the second consecutive year. Is it same the price at which it was valued at the end on the preceding year (as it is the input cost for the current year), or the actual cost incurred in the preceding year. Kindly suggest that which is the cost price of share of a company XYZ. (A) Actual cost in Financial Year 2005-06 : Rs. 10,000/- (B) Market price on 31-3-06 : Rs.6,000/- (considered as the value of closing stock and brought forwards in the Fin Yr 2006-07). The item remains unsold in Fin Yr 2006-07. (C) Market price on 31-3-07 : Rs.8,000/-. What should be considered as Cost Price while valuation of closing stock as on 31-3-2007 : (A) Rs.10,000/- or (B) Rs.6,000/-.
CAclubindia
