AS-2 VALUATION OF INVENTORIES2

8/7/2019 AS-2 VALUATION OF INVENTORIES2

1/19


2/19

Inventory is:

1)Held in the ordinary course

of business.

2)In the form of materials or

supplies to consumed in the

production process or in the

rendering of services.


3/19

Amonetary value .

Largest current asset.


4/19

NET REALIZABLE

VALUE

L

WHICHEVER IS LESS

VALUATION OF

INVENTORY

COST


5/19

WORK IN PROGRESS(WIP)

y Arising under constructioncontract.

y Arising in the ordinary corse ofbusiness.

y Financial Instruments held instock-in-trade.

y Inventories of livestock & Forestproducts.


6/19

Inventories are valued at

lowered value and net

realisable value.Cost of inventories should

comprise of all cost of

purchase, , cost of conversionand loading and unloading

charges, carriage & freight

inward.


7/19

PERIODIC INVENTORY

SYSTEM

PERPETUAL INVENTORYSYSTEM


8/19

VERIFICATION

IN

FORMAT

ION

FIGURE

COST FACTOR

INVENTORY CONTROLBUSINESS ACTIVITES

INVENTORY INCLUDE


9/19

FIRST IN FIRST

OUT(FIFO).

LAST IN FIRSTOUT(LIFO).

WEIGHTED AVERAGE

METHOD.


10/19

Purchased or produced first

are consumed first

Ending inventory includeslast goods purchased.


11/19

Value of Closing Stock =120*40

=Rs4,800.

Year2010

PurchasesUnits

RateRs

SoldUnits

Jan 100 40

March 100 50

May 80

July 200 40

October 200


12/19

Quite close to

present value.

PerishableGoods.

No Unrealised

Profits.

Useful when.

Slow Moving.

Calculation

Complicated.

Value Of stockNot Be Recent.

Price Rising.

Production Of

Identical jobs.


13/19

Issues are made out of

earliest lot o n hand.

Closing Stock is Valued

on Earlier consignments.


14/19

Value of Closing Stock =20*50+100*40=Rs. 1140

Year2010

PurchasesUnits

RateRs

SoldUnits

Jan 100 40

March 100 50May 80

July 200 40

October 200


15/19

Simple to Operate.Recovers Cost Of

Production.

Production atrecent Price.Reduces ProfitsAnd Less burdenon Tax.

Clerical Errors.Comparison

between the onejob and other job isdifficult.

More Than OnePrice.

Does not reflect the

current marketprice.


16/19

Weighted

Average =price per unit

Total cost of

goods available

for sale duringthe period

Total number of

units available

for sale duringthe period.


17/19


18/19

The cost of the purchased or

manufactured inventory has to

be determined and

Such cost is retained in the

inventory accounts of the

company until the product is

sold .


19/19

Schedule V1 .

Polices adopted.

Classification of inventories.

Documents

AS-2 VALUATION OF INVENTORIES2