The 'Closing Stock' is valued on the basis of: MCQ with Answer and Explanation

The 'Closing Stock' is valued on the basis of:
A. Market price only
B. Net realizable value only
C. Cost or net realizable value whichever is lower
D. Cost or market price whichever is higher
Answer: Option C
Solution (By JKSSB Mock Tests)
Prudence convention and AS 2 require lower of cost and NRV.

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Practice More Accountancy and Book Keeping Questions

Question #1
Under the Income Tax Act, if a taxpayer incurs a short-term capital loss of ₹2,00,000 and a long-term capital gain of ₹1,50,000 in the same year, what is the net taxable capital gain?
A. ₹3,50,000
B. ₹50,000 (Long-term)
C. ₹50,000 (Short-term)
D. Nil

Correct Answer: Option D


Explanation:
Short-term capital loss can be set off against both STCG and LTCG. Here, the STCL of ₹2,00,000 is set off against the LTCG of ₹1,50,000. The remaining STCL of ₹50,000 is carried forward. The net taxable capital gain for the year is Nil.

Question #2
The 'Reverse Charge Mechanism' (RCM) under GST applies when:
A. A registered person buys from an unregistered person (for specified goods/services)
B. Only for imports
C. A registered person buys from another registered person
D. For exports

Correct Answer: Option A


Explanation:
RCM is applicable in certain cases including supplies by unregistered persons to registered persons (though now mostly suspended except specific notified items). Also for specified services like legal, goods transport agency, etc.

Question #3
The 'External Confirmation' from a bank is an example of:
A. Analytical procedure
B. Oral evidence
C. External evidence obtained directly by the auditor
D. Internal evidence

Correct Answer: Option C


Explanation:
Direct confirmation from bank is highly reliable.