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Accounting Standard – 2 (Valuation of inventory)

Accounting Standard – 2 (Valuation of inventory). Download Accounting Standard – 2 (Valuation of inventory). Hi Friends Today we provide Simple Notes for Accounting Standard – 2. Find Best Simplified Notes for AS – 2 Valuation of Inventory, Download Full Accounting Standard Notes in PDF. Accounting Standard – 2 is Issued by ICAI and Applicable for CA Final and CA – IPCC Students. This AS-2 is Mandatory in nature and no exemption for any company. So today we provide Indian accounting Standard – 2 Valuation of Inventories or Valuation of Stock For CA Final Students and CA -IPCC Students.

Accounting Standard -2 (Valuation of inventory)

  1. This As is mandatory in nature no exemption
  2. Inventory means “Assets”
    • i.            Held for sale in normal course of business
    • ii.            Held for consumption for production of goods /services
  1. Cost Techniques
    • Standard cost This method specifies that cost calculated for any product by cost accountant as Standard cost should be used for valuation of stock
    • Retail Price : under this technique stock is calculated as follow us
Sales price of stock xxx
Less:  Gross profit xxx
xxx

This method can be applied if Gross Profit ratio is unknown daring period

    • Actual price method :  under this method  actual cost is calculated for stock similar units are valued together
Material cost xxx
Labour cost xxx
Production Exp. xxx
Cost of Stock xxx

 

    • FIFO  method is a cost formula under which cost is identified considering the last price
    • Weighted Average is a cost formula under which cost is identified on Average basis

Total purchase/Total unit purchased

    • Labour cost :- should be included in valuation of stock at cost incurred
    • Variable  Production dim :- All production Expenses related to shock which are variable in nature should be included in stock
    • For Fixed production dim :- a recovery rate is calculated

O/H Recovery Rate: –  Total fixed production over head / Actual prod or normal production

(Whichever is more)

  • N .R .V.
    • N. R. V.  for goods which have been sold before Approval of  Accounts should be taken at actual sale price – Actual sales expenses
    • N.R.V.  For goods which gave not been sold but contract has been entered for sale than

                                          Estimated sale price – Estimated sales expenses of contract

    •  If goods remain unsold till approval of accounts and contract has not been entered than management estimate should be considered.

                                         Estimated sale price as per management estimate    –   Estimated sale Expenses

    •  Raw material is valued at cost price only it is valued as follows
      • If finished goods in which such raw material is to be incorporated is expected to be sold at cost or above value of raw mat at cost price
      • If finished goods in which such raw material is to be incorporated is expected to be sold below cost value raw mat at cost price or replacement price (current purchase  price whichever is lower

Disclosures  requirements

  1. Stock valuation policy (lower of cost or NRV ) should be disclosed
  2. Cost formula ( FIFO OR w. Average ) should be disclosed
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