Loading....
Coupon Accepted Successfully!

 

Practical Steps in the Valuation Of Unsold Stock

Closing stock should be valued either at cost or market price whichever is lower. Consignment stock generally will have the following three components:

  1. Basic cost of the goods
  2. Proportionate expenses of the consignor
  3. Proportionate expenses of the consignee till the goods reaches his godown



Illustration 4

 

X consigned 20,000 units costing ₹ 5 each to Y of Delhi,

 

Transit expenses - ₹ 5,000, Insurance expenses - ₹ 3,000

 

Y took delivery and spent ₹ 3000 to bring the goods to the godown

 

Goods sold by Y - 7,000 units @ ₹ 25 each

 

Selling expenses incurred were ₹ 6,000

 

Y’s commission was 10% on sales

 

Calculate the value of closing stock under the following different alternatives:

  • If no other information is given
  • If there is normal loss of 5,000 units
  • In addition to case 2, there is a loss of 500 units due to fire in the godown

Solution:

 

As we know, in valuation of stock, only those expenses which are incurred to bring the goods to their present condition and location should be considered. Therefore, the closing stock in the above illustration is valued as follows:
 

Case: 1



Case: 2



Case: 3






Test Your Skills Now!
Take a Quiz now
Reviewer Name