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Valuation Of Inventory

Mohammed Dalal (Chartered Accountant) (163 Points)

25 May 2011

Dear All,

Whether Cash Discount given at the time of payment of the Bill can be deducted for the valuation of Stock

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16 Replies

CA ADITYA SHARMA (CA IN PRACTICE ) (16719 Points)
Replied 25 May 2011

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CA Himanshu Khurana (Chartered Accountant) (813 Points)
Replied 25 May 2011

no cash discont not deduct the valuation of stok only trade discount can be deduct

CA NITUL MEHTA (KPMG-Senior Consultant-International Tax ) (236 Points)
Replied 25 May 2011

YES WHY NOT GOING BY AS 2 IT SAYS VALUATION MUST BE DONE ON ACTUAL COST OR NET REALIZABLE VALUE BASIS SO BECAUSE OF CASH DISCOUNT IF COST OF STOCK IS GOING DOWN DEFIANTLY COST MUST BE REDUCED

Amit Surana (Student CA/CS-Professional) (268 Points)
Replied 25 May 2011

no cash discount can not be deducted for the valuation of Stock.

(Guest)

no...because you can not predict whether it will be a cash sales or credit sales...if its probable that its going to be cash sales only, then you should deduct it

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(Guest)

Originally posted by : Sundip Dalmia
	no...because you can not predict whether it will be a cash sales or credit sales...if its probable that its going to be cash sales only, then you should deduct it

(Guest)

Originally posted by : A.Jayasri
	Originally posted by : Sundip Dalmia no...because you can not predict whether it will be a cash sales or credit sales...if its probable that its going to be cash sales only, then you should deduct it

Kindly refer to Accounting Standard 2 Valuation of Inventories

nitish pawar (article..) (176 Points)
Replied 26 May 2011

`no cash discount should not be deduted`

faru faru (b) (108 Points)
Replied 26 May 2011

for costing purposes cash discount is to be ignored. bcoz we r not sure whether we will make payment in the stipulated time to enjoy cash disc.

however any other form of discount is to be deducted.

Pawan Kr. Tomar (CA) (169 Points)
Replied 26 May 2011

Cash discount is not a trade discount so can't be deducted for valuation of inventory as per AS-2

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CA ADITYA SHARMA (CA IN PRACTICE ) (16719 Points)
Replied 26 May 2011

cash discount is incentive given by supplier for timely payment. hence cash discount is not to be deducted while valuation of inventory

Mehul Jain (ROC and R&D Executive) (59 Points)
Replied 26 May 2011

no it cant be Deducted as it is not related to the Cost but it is a kind of financial Income.

Rup Kumar (finance manager) (288 Points)
Replied 26 May 2011

Cash discount should not be deducted from invoice value. Because it does not effect the market value of inventory.

Mohammed Dalal (Chartered Accountant) (163 Points)
Replied 30 May 2011

Hi all

Thanks for ur replies.

Also while gng thru AS 2 i have come to the following.

This is for the people who have said that Cash discount is an allowable expenses.

"Trade discount is reduced from cost of purchase but cash discount will not be reduced from cost of purchase. As per para 5.7 the Guidance Note on Tax Audit, it has been clarified that cash discount is financial cost & cannot reduced from Turnover, on the principle that interest paid to supplier cannot form part of cost of purchase. "