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Account entry for raw material stock

Tejas Upadhyay (Accountant) (36 Points)

10 March 2013

My company manufacures steel castings. we used Scrap as a raw material. While we prepare monthly stock for raw material we includes the Excise & all other taxes in calculation & simply put the value in closing stock..... is this enough or we should pass other any entries for excise and other taxes?? because inclussion of all taxes in closing stock is increase my profit....

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Giridhar S Karandikar (Team Lead) (7548 Points)
Replied 10 March 2013

please note that as per AS-2 Valuation of Inventories if any taxes/duties that re subsequently recoverable from the taxing authorities then suhc taxes shud not be included in the inventory valuation.

In your case if your claiming input credit of of Excise Duty paid on raw material purchased for the purpose of paying the Excise duty on finished products then there is no need to include the ED paid in inventory valuation. You can show the Excise Duty paid as an Asset under the head current assets.

Same way if there is any VAT paid then the same can be claimed as input on the VAT liability.