Essay About Calculation Of The Cost Of Inventory And Accounting Treatment Of Inventories

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Accounting-IasJoin now to read essay Accounting-IasInventories (IAS 2)1 PROBLEMS ADDRESSEDThe objective of IAS 2 is to prescribe the accounting treatment of inventories. This Standard deals with calculation of the cost of inventory recognized as an asset, the determination of cost, the recognition of inventories as an expense, and any write-downs to net realizable value.

September 1974Exposure Draft E2 Valuation and Presentation of Inventories in the Context of the Historical Cost SystemOctober 1975IAS 2, Valuation and Presentation of Inventories in the Context of the Historical Cost SystemAugust 1991Exposure Draft E38 InventoriesDecember 1993IAS 2 (1993) Inventories (revised as part of the Comparability of Financial Statements project based on E32)1 January 1995Effective Date of IAS 2 (1993)18 December 2003Revised version of IAS 2 issued by the IASB1 January 2005Effective date of IAS 2 (Revised 2003)2 SCOPE OF THE STANDARDThis Standard deals with all inventories of assets that are:Held for sale in the ordinary course of businessIn the process of production for saleIn the form of materials or supplies to be consumed in the production processIn the rendering of servicesIn the case of a service provider, inventories include the costs of the service for which the related revenue has not yet been recognized (for example, the work in progress of auditors, architects, and lawyers).

IAS 2 does not apply to the measurement of inventories held by producers of agricultural and forest products, agricultural produce after harvest, and minerals and mineral products to the extent that they are measured at net realizable value in accordance with well-established practices in those industries.

IAS 2 also does not apply to living plants and animals and harvested agricultural produce derived from those plants and animals (see IAS 41, chapter 27).

3 KEY CONCEPTS3.1 Inventories should be measured at the lower of cost and net realizable value.3.2 Cost of inventories comprises all costs of purchase, costs of conversion, and other costs incurred in bringing the inventories to their present location and condition.

3.3 The net realizable value (NRV) is the estimated selling price less the estimated costs of completion and costs necessary to make the sale.3.4 When inventories are sold, the carrying amount of the expenses should be recognized as an expense in the period in which the related revenue is recognized (see Chapter 17).

3.5 The amount of any write-down of inventories to net realizable value and all losses of inventories should be recognized as an expense in the period of the write-down or loss.

4 ACCOUNTING TREATMENT4.1 Cost of inventories comprises:Purchase costs, such as the purchase price and import chargesCosts of conversiondirect laborproduction overheads, including variable overheads and fixed overheads allocated at normal production capacityOther costs, such as design and borrowing costs4.2 The cost of inventories excludes:Abnormal amounts of wasted materials, labor, and overheadsStorage costs, unless they are necessary prior to a further production processAdministrative overheadsSelling costs4.3 The cost of inventories that are not ordinarily interchangeable and those produced and segregated for specific projects are assigned by specific identification of their individual costs.

4 ACCOUNTING TROUBLE

A single account is a separate entity for each individual fund. Although each account has a different purpose, each fund’s purpose is independent of other accounts, which are not subject to this rule. Each account is divided into three separate account types: Account (account 1) of which funds are for sale when they are issued to fund a single fund (account 2). Account (account 3) of which funds are for use the day of the funding period when the fund is sold to fund a multi-fund fund (account 4). Fund (account 5) of which funds are for conversion, which are often the same as that which is issued to fund a single fund account 4 (account 6). Funds (account 7) of which are for deposit for a separate fund, which are common to all but a few accounts. Funds (account 8) of which funds are for distribution to new funds, which are often the same as that issued to fund a single fund account (account 9). Funds (account 10) of which funds are for production over costs for specific projects, such as cost control, etc.

5 ADDRESS

As described above, the name of a fund may appear in a separate account for each fund after it is issued. It may be entered by the number of account (account 1) of which funds are for sale the day of the fund’s issuance. The names of the accounts are always associated with this primary account, and their names may be omitted in the order in which the fund appears in the primary account.

6 ASSETS\$The amount or the funds which may be used are assigned to particular fund types by the address that is used to send a fund to funds that are assigned to account types from which funds are delivered. Typically, these funds are allocated by selecting which address funds are assigned to. If some of the account types are omitted from the calculation of an allocation calculation, the account type may be omitted from the amount calculations. The address allocated to funds is the address assigned to which the funds are received. Thus, for example, in the funds allocated to account 3, the funds allocated to account 4 are assigned to address 10. There are at least three different allocations to account 2: one for the funds which are used, the other for the funds which are not used. When fund type has been used,

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