consumable store

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

25 February 2010 Pvt. Ltd. has received as investment in the form equity partly of the company from PROPI in last financial year but not alloted the share till date and intimate about remittance to RBI within 30 thirty day from the receipts of foreign money. As per agreement,rest amount has not been received from PROI after many times reminder and notice. How and what procedure is forfeiture the amount of money receipts in way of foreign money? What intimate to RBI about the above mentioned matter.

Querist : Anonymous

Querist : Anonymous (Querist)

25 February 2010 how we can calculate the value of consumable store in the end of year in pvt ltd company as inventory because it consist many item so we can not use FIFO method in this

Rasesh

Rasesh (Expert)
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25 February 2010 For stock valuation, use wieghted average method

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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24 July 2024 Let's address your questions step by step:

### Forfeiture of Investment Received from PROPI

1. **Procedure for Forfeiture:**
- Forfeiture of an investment received from a foreign entity like PROPI involves legal and procedural steps according to company law and RBI regulations.
- Since the investment was received in the form of equity, the forfeiture process typically involves:
- Issuing a notice to the investor (PROPI) indicating the intention to forfeit the investment due to non-compliance with agreed terms or non-payment of the remaining amount.
- Allowing a reasonable period for the investor to rectify the default (if applicable).
- Holding a board meeting to pass a resolution for forfeiture of the investment.
- Conveying the decision of forfeiture to the investor.
- Making necessary entries in the company's books to reflect the forfeiture.
- Complying with any regulatory requirements, including informing RBI about the forfeiture.

2. **Intimation to RBI:**
- RBI regulations require that any foreign investment received by an Indian company must be reported to RBI within 30 days of receipt.
- If the investment is forfeited, the company needs to intimate RBI about the forfeiture as well.
- This involves filing the necessary forms or notifications as per RBI guidelines for reporting foreign investments and their subsequent actions.

### Valuation of Consumable Stores (Inventory)

1. **Valuation Method:**
- In the context of a private limited company's inventory, especially when it consists of consumable stores comprising various items, using the FIFO (First-In, First-Out) method might be challenging due to the nature of consumables.
- Instead of FIFO, you can consider using the Weighted Average Cost method for valuation. Here’s how it works:
- Calculate the average cost of the consumable stores based on the total cost of goods available for sale divided by the total units available for sale.
- The formula for Weighted Average Cost is:
\[
\text{Weighted Average Cost} = \frac{\text{Total Cost of Goods Available for Sale}}{\text{Total Units Available for Sale}}
\]
- Use this weighted average cost to value the ending inventory of consumable stores at the end of the financial year.

2. **Practical Considerations:**
- Ensure that the cost includes all expenses necessary to bring the inventory to its present location and condition.
- Regularly review and update the valuation method and costs to reflect changes in inventory levels and prices.

By following these procedures and methods, your company can effectively manage the forfeiture of foreign investment and accurately value its consumable store inventory at the end of the financial year. Always ensure compliance with company law provisions and RBI regulations when dealing with foreign investments and reporting requirements.