2. A primary issue in accounting for inventories is the determination of the value at which inventories are carried in the financial statements.

3. Inventory are the tangible property of a firm Held for resale or to be consumed in the production of goods or services for sale. Regular income is generated by selling of these inventories. Their valuation and proper recording is important task.

4. Raw Materials Stores and Spares Work in Progress Finished Goods

5. Procurement Storage Maintenance Use Handling

6. Execution of production schedule Timely availability of right kind of material At right production location

7. Setting the specification(Quality parameters) Inviting Bids(selection of vendor) Placing the order

8. Receiving Quality Checking Storage Record Keeping Issue Stock audit

9. Preparation of stock taking instruction (used by verification staff) Sub division of inventory items into different groups Preparation of inventory tags (with serial no.) Name of inventory item Code number of item Quantity Location Verification date Verifiers’ name Signature of verifier

10. Preparation of item wise consolidated inventory sheets Reconciliation of physical count/quantity with the quantity disclosed by accounting records Finding out the discrepancy, if any and recounting If discrepancy still persist :Reporting discrepancy to higher management Shortage as disclosed and untracked stock as either normal or abnormal wastage

11. Value of unsold stock – Cost or market Price whichever is less (Conservative Principle) Different methods of valuation of Inventory. One method suitable for a particular situation may not be suitable for another. When a method is chosen, it is advisable to continue such method consistently from year to year.

12. Perpetual /Continuous System Periodic System

13. Stock register is maintained on an ongoing basis Every purchase and issue/sales of the inventory - entered in this book as it takes place Cost of items consumed/ sold, cost of remaining inventory. DateReceiptsIssuesBalance QtyRateAmt.QtyRateAmt.QtyRateAmt.

14. No stock register is maintained. Valuation of closing inventory is done at the end of a particular period. Entry of each and every receipt and issue is not maintained on ongoing basis.

15. First In First Out Method Last In First Out Method Simple Average Method Weighted Average Method

16. Find out quantity of closing stock Find out value of closing stock by using appropriate methods

17. Scope of Accounting Standard – 2 Applies to all types of Inventories except: Work in Progress arising out of construction contracts Work in Progress arising in the ordinary course of business of service providers Shares, debentures and other financial instruments Live stock, agricultural and forest products.

18. Cost of purchase Cost of conversion/production Any other cost incurred for bringing the inventories to the saleable condition

19. Purchase cost includes : Cost of inventory (R/M, WIP, Fin Goods) Purchase Commission Quality testing cost Carriage inward Taxes levied on these items

20. Cost of converting Raw material into semi finished or finished goods Direct and indirect cost factory level Direct and indirect material cost Direct and indirect labour Fixed as well as variable overheads

21. Finished goods - To be valued at lower of cost or market value Raw Material - To be valued on FIFO or weighted average method

22. DatePurchased Qty Rate /unitDateIssue qty 02/01/0710,00010015/01/078,500 21/01/077,0009528/01/073,500 31/01/072,2009621/02/077,000 10/020780010002/03/07800 15/03/076,20010129/03/074,400