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AS-2 valuation of Inventory

rohit (Audit Assistant) (24 Points)

16 February 2011

Hello Friends,

can u tell me what should be considered in calculation of Cost of Inventory as per AS-2 regarding valuation of cost of Books. like material , ink , royalty , covering material etc...........

Plz explain in detail !

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7 Replies

CA ANUPAMA (CMA, CA ) (149 Points)
Replied 15 March 2011

As per AS-2 Valuation of Inventory, At Cost or Net Realisable Value, which ever is lower. Net Realisable Value means The Estimated selling price less estimated costs to make the sales

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Nitin D Katariya (abc) (21 Points)
Replied 26 March 2011

As per AS-2 Inventories are to valued at lower of Cost and Net Realizable Value.

Cost for above purpose includes Cost of Purchase , Cost of Conversion & Other costs incurred in bringing inventories to their present location & condition.

Cost of conversion includes cost directly related to units i.e. Direct labour ,direct material , direct expenses. Even the Fixed & Variable Production Overheads incurred in conversion process are considered as cost of conversion and allocated to units produced.

So expenditure for material , ink, covering material etc including royalty paid are considered for determining value of books held as inventory. For apportioning royalty paid kindly refer to terms of agreement determining amount of royalty.

Rajesh Solanki (faridabad) (29 Points)
Replied 14 April 2011

as per as 2 cost of inventory shall be lower of nrv or cost

Piyush Goel (Sr. ERP Finance Consultant) (91 Points)
Replied 27 October 2012

what is estimated cost of completion in NRV??? with examples??

(Guest)

Hi rohit,

I suggest retail method for determining the cost of inventory since the volume of goods is large in number and has similar profit margins. So better take the selling price and deduct the gross margin which is expected. I suggest this only if the enterprise is doing the business of stationary.

Thanks

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Piyush Goel (Sr. ERP Finance Consultant) (91 Points)
Replied 09 April 2013

Net Realizable Value = Market Selling Price - Selling Cost - Margin ???

Please reply.

Mithun Patel (SEZ Executive) (43 Points)
Replied 16 December 2014

As per As-2, the valuation done Cost or Net Reliase Value (Which ever is less) considered., For the purpose of valuation of Stock we have to include all costs Direct Cost & Indirect cost for conversation of materials in to Salable conditions.