Accounting Standard: 2. Valuation of Inventories. Accounting Standard-2 deals with:. Determination of value at which inventories are carried in B/S, Ascertainment of cost (manner), Situation in which carrying cost of inventories is written below cost. Inventories are assets:.
Valuation of Inventories
Cost of Inventories: These include all cost of purchase, cost of conversion and other cost incurred in bringing the inventories to their present location and condition. But does not include: i) abnormal amount, ii) storage cost unless necessary in the production, iii) administrative overhead, iv) selling and distribution cost.
Cost Formula: Valuation of inventories depend on cost formula used by entity: a) Specific identification method, b) FIFO, c) Weighted Average, d) Standard Cost, e) Retail Method (for retail trader).