Accounting Standard AS 2 Valuation of Inventories Revised PDF


Here we come with detailed information on the Valuation of Inventories and Accounting Standards with ICAI Revised Notes. Many of the aspirants like CA CPT, CA IPCC, CA Final, CWA, CS are in search of Accounting Standards. The Indian Accounting Standards are provided by the IASB (Indian Accounting Standards Board). The Accounting Standards is introduced for valuation of Inventory with Enterprise Course of Business.

The Valuation of Inventory AS 2 explains the different method of valuation of a Closing stock. As per the Accrual Concept Anticipate ever loss but not Profit until it is recognized. So Valuation of Inventory is calculated under various methods such as LIFO, FIFO, Weighted Average, …etc.

Objectives of AS 2 (Valuation of Inventory)

The Primary object of Accounting standard 2 is to the valuation of inventory and financial statements until revenue is determined. For detailed information about the AS 2 Valuation of Inventory refer to the below-given information.

  • Valuation of Closing Stock and revenue recolonization.
  • Estimation of the Opening and Closing Work In Progress.
  • Analysis of the Opening Stock, Closing Stock, Sales and Purchases, Cost of Goods Sold.

Inventories are Assets

  • Held For sale in the Ordinary Course of Business and not personal Use.
  • Inventories process of production for such sale.
  • The materials or supplies to be consumed in the production process or rendering of Services.

Net Realizable Value:-

The Estimated selling prices are evaluated through the Closing and Opening Stock. Need to evaluate the Present selling price through Net Realizable Value. Through evaluating, the Selling Price can be realized. Inventories encompass the goods purchased and held for resale. The cost of inventories should comprise all costs of Purchase of conversion and Other Costs Incurred in Bringing the Inventory.

Measurement of Inventories:-

The Inventories should be valued at the lower of cost and net realizable value whichever is less. Here we explained each and every measurement of Inventories like Cost of Inventories, Cost of Purchase, Costs of Conversion and Other Costs.

 Cost of Inventories

Many of the cost of Inventories is comprise all the costs of Purchase and Cost of Conversion which is incurred in bringing the inventories to their present location and Condition.

Costs of Purchase

The Costs of Purchase includes the Duties and taxes other than recoverable by the Enterprise from the Taxing Authorities. Some of the examples of Costs of Purchase is Freight Inwards, Expenditure, Trade Discounts, Rebates, Duty Drawbacks ..etc.

Costs of Conversion

The Costs of conversion of inventories can directly be related to the Units of Production and Direct Labour. Cost of expenditure using for the Direct Production of any Product like wages, rent, Labour, charges …etc. The valuation of Inventories is valued through the system of allocation of resources.

Exclusions From the Cost of Inventories

  • Abnormal Amounts of the Wasted materials, Labour and Other Production Costs.
  • Storage Costs in the Production Process prior to a further production stage.
  • Administrative overheads cannot come under the valuation of Inventories and treated as indirect Expenses.

Candidates can download the AS 2 Valuation of Inventories PDF Format is given below.

Accounting Standards AS 2 Valuation of Inventories Check Now


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