Accountants are a cautious lot and where alternative accounting procedures or valuations are possible, the most pessimistic one is normally chosen. This is the prudence concept: that is, giving the most cautious representation of the financial position.
So, if you have unsold goods at the end of your financial year, in your balance sheet, they will be valued at their purchase cost (say, £100 each) rather than their sale price of £150. To value them at their sale price of £150, would mean that you had anticipated making a profit of £50 before you had actually sold them.
Also, for example, if a loss is foreseen, it should be taken into account immediately: If a business purchases stock for £1,200 but then because of a sudden slump in the market, it can only be sold for £900, then the stock should be valued at £900 in the accounts, (therefore recognising the £300 immediately.
The prudence concept basically means not counting your chickens before they’re hatched.