Valuation of Stock as on the Balance Sheet Date

1. Stocktaking should be made on the date of the close of a financial period. It should
include every item of goods of which the business is the owner. If there are any goodsin-
transit or goods with the selling agent or goods sent on approval for which the sale
is yet to be confirmed such goods should be included in stock. On the other hand, goods
sold but not yet delivered should be excluded.
Goods purchased within the accounting period and recorded in the accounts should be
included in stock. Thus physical stock in the godown of the business may not be the
actual value of stock to be included in the final accounts.
2. If stock taking is made on a date a few days before or after the date of the close of the
financial period, Purchases, Purchase Returns, Sales and Sales Return between these
two dates should be adjusted (to arrive at the value of the stock on the closing date of
the accounting period).
The sales and Sales Return should be taken at cost price or market price whichever is lower.
Notes
1. Where any sale has been made at a loss or at a profit not conforming to the normal rate
of profit, the cost price of the goods thus sold should be separately ascertained.
2. For valuation of inventory the principle of Cost Price or Net Realisable Price whichever
is lower should be applied.
3. Adjustments for undercasting /overcasting of stock, goods held for consignment basis,
etc., should also be made.