Sandeep Jindal (Student) (31 Points)
26 May 2009Dear Members,
I have some Query regarding Raw material Inventory.
A company purchased some material worth Rs. 500 Crores before start of commercial production when the commercial production starts the fair value of that material will be Rs. 300 Crores only.Can the company treat that loss in its Profit and loss account or have to treat in preoperative accounts.
Please respond me as early as possible.
Sandeep Jindal
raghunathan
(employed)
(29 Points)
Replied 27 May 2009
The loss mentioned in your query is an economic loss and not a loss due to production during trial period. The loss therefore should be dealt with in P&L account and not to be treated as pre-operative expense and add to the value of the asset.
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