This chapter will help the readers to:
- Understand the meaning of the term ‘inventory’ and identify various components of inventory.
- Quantify the impact of inventory on the statement of profit and loss and on the balance sheet.
- Differentiate between periodic inventory system and perpetual inventory system.
- Compute the cost of goods sold and ending inventory using different methods of inventory, viz., FIFO, LIFO, weighted average and specific identification.
- Appreciate the application of conservatism principles while valuing inventory using ₹lower of cost or net realizable value’.
- Appreciate the requirements of Ind AS 2 on accounting and valuation of inventory.