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Valuation of Closing Stock

  • Stock lying with the consignee belongs to the consignor and should be recorded in the financial statements of the consignor.
  • Closing stock is the item which appears twice in the financial statements. One in trading account and the other in the Balance sheet. In consignments, in place of trading account we have consignment account.
  • Stock should be valued at cost or net realizable value whichever is lower.
  • Cost price for this purpose means the purchase price plus expenses which are incurred to bring the goods to their present location and condition (whether incurred by the consignor or the consignee). Such expenses include expenses like packaging, freight, cartage, insurance in transit, Octroi etc.

Note: The expenses incurred after the goods have reached the godown should not be treated as a part of the cost of the goods.

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