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Query : Inventory and Investments

Anil (1638 Points)

24 November 2009

Please let me know the criteria to be applied to treat something as :

a) inventory

b)Investments

Thanks.

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5 Replies

CA SUDIPTA SINHA (Commerce Coaching- Accounts Cost FM) (735 Points)
Replied 24 November 2009

inventory is asset which is held for immediate sell or held for production of goods or for providing services.....investment is the active redirection of resources/assets to creating benefits in the future; the use of resources/assets to earn income or profit in the future......

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Anil (1638 Points)
Replied 24 November 2009

A company has invested in some shares of public company which it will sell immediately if it gets the right price. Going by your difinition should we classify this investments as stock in trade?

Thanks.

CA SUDIPTA SINHA (Commerce Coaching- Accounts Cost FM) (735 Points)
Replied 24 November 2009

For this u have to know whether he is dealing in shares....if yes then it can be classified as stock in trade.......because in such a case it is the commodity.....

Jag Bhushan Sharma (Faculty in a B-School) (633 Points)
Replied 25 November 2009

For classifying shares as inventory or investment you have to look into the purpose of buying shares. Most of the companies invest their surplus cash in shape of readily saleable securities, in such cases they are classified as investments. In case buying and selling of securities is their main business, then they will be classified as stock-in-trade.