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Questions and Answers
What is the primary issue in accounting for inventories?
What is the primary issue in accounting for inventories?
- Estimating the future demand for inventories
- Forecasting the market trends for inventories
- Calculating the potential obsolescence of inventories
- Determining the value at which inventories are carried in the financial statements until the related revenues are recognised (correct)
What does Accounting Standard (AS) 2 deal with?
What does Accounting Standard (AS) 2 deal with?
- Assessment of goodwill
- Determination of the value of inventories and any write-down to net realisable value (correct)
- Calculation of depreciation for fixed assets
- Valuation of intangible assets
In which context should this Accounting Standard be read?
In which context should this Accounting Standard be read?
- In the context of global economic trends
- In the context of industry-specific regulations
- In the context of its objective, the Preface to the Statements of Accounting Standards, and the ‘Applicability of Accounting Standards to Various Entities’ (correct)
- In the context of historical inventory data
What is excluded from the scope of this Standard?
What is excluded from the scope of this Standard?
What does the bold italic type in the Standard indicate?
What does the bold italic type in the Standard indicate?
Which of the following is the primary issue in accounting for inventories?
Which of the following is the primary issue in accounting for inventories?
What is the scope of Accounting Standard (AS) 2* (revised 2016)?
What is the scope of Accounting Standard (AS) 2* (revised 2016)?
What does AS 2* (revised 2016) deal with?
What does AS 2* (revised 2016) deal with?
What type of contracts are excluded from the scope of AS 2* (revised 2016)?
What type of contracts are excluded from the scope of AS 2* (revised 2016)?
What should be considered in determining the value of inventories according to AS 2* (revised 2016)?
What should be considered in determining the value of inventories according to AS 2* (revised 2016)?
Study Notes
Primary Issue in Inventory Accounting
- The primary issue in accounting for inventories is determining their proper valuation and presentation in financial statements.
Accounting Standard (AS) 2
- AS 2 deals with the valuation of inventories, providing guidelines on how to measure and disclose them.
Context for AS 2
- This Accounting Standard should be understood within the context of general accounting principles, particularly concerning financial reporting and inventory management.
Exclusions from AS 2
- The scope of AS 2 excludes work in progress under construction contracts and financial instruments.
Bold Italic Type in AS 2
- The bold italic type within the Standard highlights critical concepts and essential definitions that must be understood for proper application.
Scope of AS 2* (revised 2016)
- AS 2* (revised 2016) focuses on refining the valuation principles for inventories and clarifies accounting treatment under various scenarios.
Topics Covered by AS 2* (revised 2016)
- It addresses the measurement of inventories, including cost formulas like FIFO (First-In, First-Out) and weighted average cost.
Excluded Contract Types in AS 2* (revised 2016)
- Construction contracts and contracts for service delivery are excluded from the scope of AS 2* (revised 2016).
Valuation Considerations According to AS 2* (revised 2016)
- When determining the value of inventories, considerations must include costs of purchase, conversion costs, and other costs incurred to bring inventories to their present location and condition.
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Description
Test your knowledge of the revised 2016 Accounting Standard (AS) 2 on Valuation of Inventories with this quiz. Evaluate your understanding of the main principles and key paragraphs of the standard.
