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CS Executive · Corporate Accounting and Financial Management · Introduction to Accounting

At the year end, Mehta Enterprises has stock costing ₹80,000 whose net realisable value is ₹68,000. Another lot costs ₹50,000 with net realisable value ₹60,000. Applying the convention of conservatism and valuing each lot separately at lower of cost and net realisable value, what is the total closing stock value?

The total closing stock is ₹1,18,000. The first lot is taken at net realisable value of ₹68,000 as it is lower than cost, and the second lot at cost of ₹50,000, since conservatism anticipates losses but not unrealised gains.

  1. A₹1,28,000Correct
  2. B₹1,30,000
  3. C₹1,18,000
  4. D₹1,40,000

Explanation

The first lot is valued at NRV ₹68,000 (lower than cost). The second is valued at cost ₹50,000 (lower than NRV ₹60,000). Total is ₹1,18,000. Wait: 68,000 + 50,000 = ₹1,18,000, so the correct option is ₹1,18,000.

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