ABHISHEK (TRAINEE) (77 Points)
18 August 2010
Q) WHICH OF THE FOLLOWING DO NOT CONSTITUTE INVENTORIES ?
a)stock for sale in ordinary business
b)stock for production
c)stock for services
d)stock for share trading
PLEASE !! GIVE ANSWER WITH EXAMPLE.
PLEASE EXPLAIN "STOCK FOR SERVICES" ?
Karthik
(student)
(147 Points)
Replied 18 August 2010
As Per AS 2,
Inventories are assets:
(i) held for sale in the ordinary course of business;
(ii) in the process of production for such sale; or
(iii) in the form of materials or supplies to be consumed in
the production process or in the rendering of services.
The most appropriate answer for ur question is
(d) stock for share trading.
this answer is debatable because the above definition can be applied to stock for share trading also...
Only thing is that financial instruments held as stock in trade is expressly spelt out of the scope of AS2..
Going deeper..
Inventories are assets:
(i) held for sale in the ordinary course of business;
(ii) in the process of production for such sale; or
(iii) in the form of materials or supplies to be consumed in
the production process or in the rendering of services.
Definition of asset.
Asset is a resource controlled by the enterprise as a result of past events from which future economic benefits are expected to flow to the enterprise.
therefore, stocks held for trading can also be treated as inventory by going with the above definitions eventhough it is not covered under AS 2.
So, Strictly speaking, none of the options can be considered as an answer..
But as i said earlier, appropriate answer is (d)
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ABHISHEK
(TRAINEE)
(77 Points)
Replied 20 August 2010
THANKS KARTHIK ,
BUT "STOCK FOR SERVICES"
Stock for services can be catalogues that you have to be given to your prospective customers, stationery (usually banks have large quatity of stationery), sometimes CDs are made for circulation etc. It depends whether you want to expense out these items or show them in stock and expense out on consumption basis. If the quantity is very large, then it has to be taken in stock.
PLEASE GIVE YOUR VIEW POINT !!!!!!
Karthik
(student)
(147 Points)
Replied 21 August 2010
If u are a beautician, you will have a significant stock of cosmetics and other related items.
These are an example for stock for services.
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