When there is unexpected fall in sales firms will have certain amount…

When there is unexpected fall in sales firms will have certain amount of unsold stock that they didn’t anticipate. Such stock is known by:

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → Unplanned Accumulation of Inventories.

A firm decides how much to produce by estimating how much it will sell, and it may plan to add to its stock of unsold goods (its inventories) or to draw it down. If sales then fall short of what was expected, goods meant for sale stay in its godown and the stock rises beyond the plan. This rise, which the firm did not plan, is an unplanned accumulation of inventories.

For example, a firm that starts the year with 100 shirts, produces 1,000 expecting to sell 1,000, and sells only 600 ends the year with 500 shirts instead of the 100 it planned: an unplanned accumulation of 400 shirts.

Why the other options are incorrect

Option (1) Planned Accumulation of Inventories. — Incorrect. A planned addition is one the firm decided on in advance; here the extra stock came from a fall in sales it did not expect.
Option (3) Unplanned Decumulation of Inventories. — Incorrect. This is the opposite case: an unexpected rise in sales draws the stock down below the plan.
Option (4) Regular Inventories. — Incorrect. There is no such category of inventories.

Note: A similar question was also asked in CUET (UG) 2026 on 15-05-2026 (Slot 1) and 20-05-2026 (Slot 1).

NCERT (2025-26): “2.2.1 The Product or Value Added Method … Change in inventories may be planned or unplanned. In case of an unexpected fall in sales, the firm will have unsold stock of goods which it had not anticipated. Hence there will be unplanned accumulation of inventories. In the opposite case where there is unexpected rise in the sales there will be unplanned decumulation of inventories. This can be illustrated with the help of the following example. Suppose a firm produces shirts. It starts the year with an inventory of 100 shirts. During the coming year it expects to sell 1,000 shirts. Hence, it produces 1,000 shirts, expecting to keep an inventory of 100 at the end of the year. However, during the year, the sales of shirts turn out to be unexpectedly low. The firm is able to sell only 600 shirts. This means that the firm is left with 400 unsold shirts. The firm ends the year with 400 + 100 = 500 shirts. The unexpected rise of inventories by 400 will be an example of unplanned accumulation of inventories.…”