Friday, 29 June 2012

AS-2 Valuation of inventory

As  per AS-2 Inventories are to valued at lower of Cost and Net Realizable Value.
Cost for above purpose includes Cost of Purchase , Cost of Conversion &                                   Other costs incurred in bringing inventories to their present location & condition Cost of conversion includes cost directly related to units i.e. Direct labour ,direct material , direct expenses. Even the Fixed & Variable Production Overheads incurred in conversion process are considered as cost of conversion and allocated to units produced.
So expenditure for material , ink, covering material etc including royalty paid are considered for determining value of books held as inventory. For apportioning royalty paid kindly refer to terms of  agreement determining amount of royalty.

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