The cost price of stock is the total cost involved in bringing stock to its present location and condition ready for sale. The cost price of stock can be determined either using product costing or period costing (see previous post).
Net realisable value is the estimated amount the business expects to gain from the sale of the stock in the ordinary course of business.
Once measured, the lower of cost and net realisable value is the carrying amount the business recognises as an asset in the Balance Sheet. The accounting treatment prescribed by AASB 102 is shown below.
Information in this post is based on the attached CPA Australia fact sheet.
For a more detailed overview have a look at my PowerPoint presentation for Year 12 Accounting on Stock Valuation.