PPT: Accounting Standards (2) | Advanced Accounting for CA Intermediate PDF Download

 Page 1


Accounting Standards – 2
Valuation Of Inventories
Page 2


Accounting Standards – 2
Valuation Of Inventories
Objective of Accounting 
Standards
• The basic objective of accounting standards is to
remove variations in the treatment of several
accounting aspects and to bring about
standardization in presentation
• The ACCOUNTING STANDARDS BOARD
(ASB) which functions under ICAI issues
accounting standards
Page 3


Accounting Standards – 2
Valuation Of Inventories
Objective of Accounting 
Standards
• The basic objective of accounting standards is to
remove variations in the treatment of several
accounting aspects and to bring about
standardization in presentation
• The ACCOUNTING STANDARDS BOARD
(ASB) which functions under ICAI issues
accounting standards
OBJECTIVE
valuation of inventories
• Formulate the method of computation of cost of
inventories/stock.
• Determining the value of closing stock at which it is to be
shown in balance sheet till it is not sold and recognized as
revenue.
Page 4


Accounting Standards – 2
Valuation Of Inventories
Objective of Accounting 
Standards
• The basic objective of accounting standards is to
remove variations in the treatment of several
accounting aspects and to bring about
standardization in presentation
• The ACCOUNTING STANDARDS BOARD
(ASB) which functions under ICAI issues
accounting standards
OBJECTIVE
valuation of inventories
• Formulate the method of computation of cost of
inventories/stock.
• Determining the value of closing stock at which it is to be
shown in balance sheet till it is not sold and recognized as
revenue.
Applications
• This Standard should be applied in accounting for inventories other
than:
(a)work in progress arising under construction contracts, including directly related
service contracts (see Accounting Standard (AS) 7, Construction Contracts);
(b)work in progress arising in the ordinary course of business of service providers;
(c)shares, debentures and other financial instruments held as sk in trade; and
(d)producers' inventories of livestock, agricultural and forest products, and mineral
oils, ores and gases to the extent that they are measured at net realisable value in
accordance with well established practices in those industries.
Page 5


Accounting Standards – 2
Valuation Of Inventories
Objective of Accounting 
Standards
• The basic objective of accounting standards is to
remove variations in the treatment of several
accounting aspects and to bring about
standardization in presentation
• The ACCOUNTING STANDARDS BOARD
(ASB) which functions under ICAI issues
accounting standards
OBJECTIVE
valuation of inventories
• Formulate the method of computation of cost of
inventories/stock.
• Determining the value of closing stock at which it is to be
shown in balance sheet till it is not sold and recognized as
revenue.
Applications
• This Standard should be applied in accounting for inventories other
than:
(a)work in progress arising under construction contracts, including directly related
service contracts (see Accounting Standard (AS) 7, Construction Contracts);
(b)work in progress arising in the ordinary course of business of service providers;
(c)shares, debentures and other financial instruments held as sk in trade; and
(d)producers' inventories of livestock, agricultural and forest products, and mineral
oils, ores and gases to the extent that they are measured at net realisable value in
accordance with well established practices in those industries.
DEFINITION   
Inventories are assets:
• Held for the sale in the ordinary course of business
(Finished Goods).
• In the process of production of such sale (Raw material and
working progress).
• In the form of materials and supplies to be consumed in the
production process or in the rendering of services (Stores,
Spares, Raw material).
• Inventories do not include machinery.