cs corp accounts

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Nehal Bansal (Querist)
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04 August 2021 X Ltd. has 5,000 AC in stock on 31st March, 2019. The cost of each AC amount
to `10,000. There is firm commitment of sale of 1,000 AC by the company in
April, 2019 @ `15,000 per AC. However, the general price of this AC at year end
amounts to ? 9,500 per AC. Calculate the Value of Closing Stock as per AS-2

Deepa B

Deepa B (Expert)
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04 August 2021 As per AS-2, in case of finished goods, the value of stock will be lower of cost or net realizable value (NRV). In the given case Cost of AC-Rs.10,000 per AC and NRV-Rs.9,500 per AC. Lower between the two is Rs.9,500/-. Therefore value of closing stock is Rs.9,500 X Rs.5,000= Rs.4,75,00,000.
It's not prudent recognize profit on anticipated sales which is yet to be materialized. The point of firm commitment of sale is given just to confuse. Recognition of revenue associated with sales is specifically dealt in AS-9 Revenue recognition, which requires one to check whether all the conditions mentioned therein are satisfied or not.