Question

Stock is valued at market price or cost which ever is less'.explain the concept used in the above statement.

Answer 1

Closing stock is the goods that remain unsold at the end of the year. It is valued at Cost price or Realisable Value, whichever is less.

It is based on the principle of Conservatism or prudence, According to which all anticipated losses should be recorded in the books of accounts, but all anticipated or unrealized gains should be ignored.

Answer 2

Stock is valued at market price as Closing stock to be valued at cost or market price so whichever lower that includes rule based on theory anticipated profit is not brought with the account before actual realization.

Market will not let you unless you brought down your inventory value to the lowest and it will remain unsold.