if market value of goods purchased has fallen down, the stock will be shown at cost price in the books, but if the market value has gone up, the fain is not to be recorded until the stock is sold. i don't get it. please elaborate

Question

if market value of goods purchased has fallen down, the
stock will be shown at cost price in the books, but if the market
value has gone up, the fain is not to be recorded until the stock
is sold i don't get it please elaborate

Lal Singh · Accepted Answer

Dear Student,
As per Accounting Standard the carrying amount of Inventory is
{COST or Net realizable value} which ever is Less you seems
to be confused while asking the question
If the question is about showing at least of the two i e cost or
NRV - it's based on conservatism concept and the second part i e
why don't we show GAIN again anticipated gains are not accounted
for on the same principles
Plz feel free to ask any other query on above topic