Whether depreciation is considered for stock valuation purpo

This query is : Resolved

Aashish Kumar Jain (Querist)
Follow

28 December 2012 Sir, I am doing the Stock Audit of one company (Manufacturing Concern) on behalf of the bank. Can anyone please clarify me whether Depreciation is considered in Cost while calculating Drawing Power (DP) of the company. As per my point of view it should not be considered because first it is unavoidable cost and second only considered when plant is running at 100% capacity, but i am not sure about it. Please help me out and please provide the reasoning for your answer also and any reference from where i can also check this out.
Thanks in Advance
Waiting for response.

Guest

Guest (Expert)

04 January 2013 Stock is to be valued at cost. Cost means purchase cost plus duties & taxes ( except the duties whose credit can be claimed), freight & other expenses incurred in bringing the stock to the factory / manufacturing unit. Refer AS - 2 on Valuation of Inventories by The ICAI.