Closing stock should, in the broadest terms, be valued at whichever is LOWER of cost paid or achievable value.Obviously, as the above poster pointed out, you would actually generally use an accounting policy for valuing your stock, usually AVCO or FIFO (never LIFO, it s now illegal in most countries and against international accounting practises).
The balance sheet has to reflect a true and fair view so the value of your stock would be whatever it is worth as it stands in the open market. That is not necessarily what you paid for it as its value might have gone down and it is likely to be less than the expected retail value (which includes profit margin).There are conventions for keeping a running estimate of stock value (FIFO, LIFO and AvCo ... maybe others since I studied bookkeeping many years ago) though these are no substitute for a proper periodic valuation.If your only choice is between cost price, selling price and profit element, I suggest you use cost price.
Cost priceCost price is a known fact. What you sell it for is an unknown amount (or might end up at a loss).
