8

Accounting and Valuation of Inventory

CHAPTER OBJECTIVES

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.
8.1 MEANING OF INVENTORY ...

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