Question

why closing stock in final accounts show as cost price or market price whichever is less?

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.

For example : Suppose Goods were purchased for ₹ 50,000 but at present it's realisable value is ₹ 1,00,000. So, it will be valued at ₹ 50,000 and not at ₹ 1,00,000.