AS 2 Valuation of Inventories Quiz
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Questions and Answers

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?

  • 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 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?

    <p>Work in progress arising under construction contracts</p> Signup and view all the answers

    What does the bold italic type in the Standard indicate?

    <p>The main principles</p> Signup and view all the answers

    Which of the following is the primary issue in accounting for inventories?

    <p>Determining the value at which inventories are carried in the financial statements until the related revenues are recognised</p> Signup and view all the answers

    What is the scope of Accounting Standard (AS) 2* (revised 2016)?

    <p>It should be applied in accounting for inventories other than work in progress arising under construction contracts</p> Signup and view all the answers

    What does AS 2* (revised 2016) deal with?

    <p>Determination of the value of inventories and any write-down to net realisable value</p> Signup and view all the answers

    What type of contracts are excluded from the scope of AS 2* (revised 2016)?

    <p>Work in progress arising under construction contracts</p> Signup and view all the answers

    What should be considered in determining the value of inventories according to AS 2* (revised 2016)?

    <p>Ascertainment of cost of inventories and any write-down thereof to net realisable value</p> Signup and view all the answers

    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.

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