Consumption of Raw Material

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Puja Bhansali (Querist)
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25 August 2010 Please tell me what is the mening of purchases while calculating the consumption ammount? Closing Stock is valued at as per AS-2 i.e.cost or NRV whichever is lower.Closing stock is exceeding the purchase price as it includes freight amount and so the consumption turns to be negative? Is there is any remedy for this?? Please do reply fast.

CA Anisha Ray

CA Anisha Ray (Expert)
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26 August 2010 Dear Puja,

For calculating the Consumption figure, the calculation normally followed is

Opening Stock xxx
Add: Purchases xxxx
Less : Closing Stock xxxx

When you take the purchases figure it will be your Gross Purchases for the entire year including that part which is in stock at the end of the year.