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Indian Accounting Standard 2: Inventories

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Indian Accounting Standard 2: Inventories

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Questions and Answers

What is the objective of Indian Accounting Standard 2?

To provide guidance on financial reporting

To recognize inventories as assets

To prescribe the accounting treatment for inventories (correct)

To determine the net realisable value of inventories

Which term is defined in Indian Accounting Standard 2?

Inventories (correct)

Net realisable value

Inventory cost

Fair value

What does Indian Accounting Standard 2 provide guidance on?

Determining the inventory cost (correct)

Recognition of intangible assets

Measurement of goodwill

Valuation of financial instruments

To which inventories does Indian Accounting Standard 2 apply?

All inventories except financial instruments and agriculture Signup and view all the answers

What is the scope of Indian Accounting Standard 2?

<ul> <li>Applies to all inventories except Ind AS 32 & 109 Financial Instruments and Ind AS 41 Agriculture</li> </ul> Signup and view all the answers

What does Indian Accounting Standard 2 provide guidance on?

Determination of cost and subsequent recognition as an expense for inventories Signup and view all the answers

Which term is defined in Indian Accounting Standard 2?

Net realisable value Signup and view all the answers

To which inventories does Indian Accounting Standard 2 apply?

All inventories except financial instruments and agricultural assets Signup and view all the answers

What is the objective of Indian Accounting Standard 2?

To prescribe the accounting treatment for inventories Signup and view all the answers

What does Indian Accounting Standard 2 provide guidance for?

$Determination$ $of$ $the$ $cost$ $of$ $inventories$ $and$ $subsequent$ $recognition$ $as$ $an$ $expense$ Signup and view all the answers

Study Notes

Objective of Indian Accounting Standard 2

Aims to prescribe the accounting treatment for inventory.
Ensures that inventories are measured at the lower of cost and net realizable value.

Definition of Terms

Defines "Inventories" which includes assets held for sale, in production, or in the process of production for sale.

Guidance Provided

Offers guidance on the determination of cost for various inventory categories.
Details the methods of allocating cost to inventory and its subsequent recognition as an expense.
Includes guidance on the assessment of net realizable value.

Applicability to Inventories

Applies to all inventories except those measured at fair value less costs to sell.
Excludes inventories held by producers of agricultural and forest products, minerals, and livestock.

Scope of Indian Accounting Standard 2

Covers all types of inventories held for resale, production, or consumption.
Relevant to businesses engaging in manufacturing, retail, and other sectors that hold stock.

Additional Guidance

Suggests appropriate cost formulas (e.g., FIFO, weighted average) for inventory valuation.
Addresses the need for periodic reviews of inventory to identify obsolete or slow-moving items.

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Description

Test your knowledge on Indian Accounting Standard 2: Inventories with this quiz. Learn about the objective, scope, terms, and valuation methods related to inventories in financial statements.