Packing material treatment?

Ankush (Student) (1364 Points)

23 June 2017

Should it be treated as expense or current asset?

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CA Hariprasad Nayak (Chartered Accountant) (221 Points)
Replied 23 June 2017

It should be part of the inventory. See below Extract of AS-2-

"3. The following terms are used in this Standard with the meanings specified:

3.1 Inventories are assets:

(a) held for sale in the ordinary course of business;

(b) in the process of production for such sale; or

(c) in the form of materials or supplies to be consumed in the production process or in the rendering of services

Packing materials get fit into either (b) or (c) above.

To the extent of usage, the expense is recognised and balance appears as 'Current Asset'.

Hope the above was useful.

Regards

CA Hariprasad Nayak

+91 9481 227 467

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