Question

What is included in the valuation of Inventory?

What expenditures are included in Inventory?

Answer 1

Answer:

Inventory: Inventory is substantial property to be devoured underway of merchandise or benefits or held available to be purchased in the conventional course of business. Inventories are unconsumed or unsold products obtained or made Inventories for the most part constitute the biggest current resources of assembling firms.

Definition According to Accounting Standard (AS) – 2 (Revised) Inventories are "resources:

a) held available to be purchased in the customary course of business;

b) during the time spent generation for such deal; or

c) as materials or supplies to be expended in the creation procedure or in the rendering of administrations."

(1)-Valuation Of Inventory:

“Inventories should be valued at lower of historical cost and net realisable value.”

Included in the Valuation Of Inventory :

1. Finished products: – Purchased or – Produced totally however staying unsold

2. Work-in-advance (work-in-process): – Units brought into the generation procedure yet will be yet to be finished.

3. Crude Materials, Components, Stores and Spares: – Raw materials - merchandise that are yet to be brought into the generation procedure. – Stores and extras - industrial facility supplies, for example, coolants, cleaning material, and apparatus saves.

•Manufacturing concern - stock comprises of the majority of the over 3 segments

(2) : Expenditures that are Included in Inventory -

Purchase cost

conversion cost

Other costs

(a) :purchase cost-

Purchase price + non Recoverable taxes

(b) : Conversion cost-

Cost of Conversion rawmaterial into Finished goods

Example: material,labour,Production Overhead+Fixed &Variable Overhead

(c):other costs-

Cost of bringing the inventory at particular location

Example: Freight charges,loading charges,unloading charges