I'm working in Road Construction firm. We purchases various items like Bitumen, Cement, Steel rodes. There is no problem in passing the Purchases of these items.But a quantity of these items are used in road making. so how should I record the consumption of these items as now they have decreased from actual stock ?
besides I haven't sell any of them to any third party, ??
The new IndAS revenue recognition standard deals with this.
You can recognise purchases and bank,
Recognise CONTRACT ASSET which will hold inventory and WIP within the asset.
There is no specific scope in IndAS 2 to stop recognising inventory however the Contract asset is followed.
Using the input method of Stage of completion= recognise assets, expenses, revenues and liabilities.
Costs to date will hold inventory = 100+100 inventory
Receivables (100)
Contract Asset = 100
if you recognise inventory= 100 then assets will be overstated ie. if you look up at the calculations.
CAclubindia
