A company purchased goods for Rs1000000 and sold 80% of such goods during the year.The market value of the remaining goods was Rs180000.The company valued the closing stock at Rs200000 i.e.cost.Is the treatment correct ?
According to prudence concept, losses should be anticipated and profits should be ignored. Hence, the stock shold be valued at the lesser value, whether it is market value or book value.
In this case, the stock should have be valued at the market value because it is less than the book value. Hence, the treatment is wrong.