{"id":10310,"date":"2024-03-19T04:44:13","date_gmt":"2024-03-18T23:14:13","guid":{"rendered":"https:\/\/gstguntur.com\/?p=10310"},"modified":"2024-03-20T17:03:57","modified_gmt":"2024-03-20T11:33:57","slug":"inventory-valuation-ca-foundation-accounts-study-material","status":"publish","type":"post","link":"https:\/\/gstguntur.com\/inventory-valuation-ca-foundation-accounts-study-material\/","title":{"rendered":"Inventory Valuation \u2013 CA Foundation Accounts Study Material"},"content":{"rendered":"<p>Inventory Valuation \u2013 <a href=\"https:\/\/gstguntur.com\/ca-foundation-accounts-study-material\/\">CA Foundation Accounts Study Material<\/a>\u00a0is designed strictly as per the latest syllabus and exam pattern.<\/p>\n<h2>Inventory Valuation \u2013 CA Foundation Accounts Study Material<\/h2>\n<p>Question 1.<br \/>\nPeriodic inventory system<br \/>\nAnswer:<br \/>\nPeriodic\/Physical inventory system<\/p>\n<ul>\n<li>No records of inventory are maintained.<\/li>\n<li>Inventory is ascertained by physical counting at the end of the year and then valued.<\/li>\n<li>It is simple and commonly followed by small organisations.<\/li>\n<\/ul>\n<p>Unless otherwise specified, we can always assume that inventory\/closing stock for annual financial account purposes is ascertained by physical counting and then valuing.<\/p>\n<p>Question 2.<br \/>\nPerpetual inventory system.<br \/>\nAnswer:<br \/>\nPerpetual\/continuous inventory system:<\/p>\n<ul>\n<li>Inventory records also known as stores records are maintained in which details of each and every item are kept.<\/li>\n<li>The records may be in only quantity form or may include value also (known as priced ledger).<\/li>\n<li>The details of receipt and issue are recorded instantly and balance ascertained.<\/li>\n<li>Hence balance of all items of inventory are always available. The balance of year end can be used in financial accounting for final accounts.<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Inventory Valuation \u2013 CA Foundation Accounts Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 3.<br \/>\nStock taking.<br \/>\nAnswer:<br \/>\nStock taking:<\/p>\n<ul>\n<li>Stock taking is referred to the process of physical counting\/checking of each item of inventory.<\/li>\n<li>It is a necessary element of inventory control system.<\/li>\n<li>It can be carried at pre-determined time interval or on a surprise basis i.e. any time without intimating in advance to the stores people.<\/li>\n<li>All items may be verified together at one time or on few items everyday basis.<\/li>\n<li>Important and valuable items will be verified more frequently than others.<\/li>\n<li>In perpetual inventory system also stock taking is carried so as to prove the accuracy of stock records.<\/li>\n<li>In periodic inventory system stock taking is carried at the year end.<\/li>\n<\/ul>\n<p>Question 4.<br \/>\nFIFO &amp; LIFO method<br \/>\nAnswer:<br \/>\nFIFO &amp; LIFO method:<br \/>\nFIFO (First In First Out) method:<\/p>\n<ul>\n<li>In FIFO method it is assumed that the lot of material which comes first will be issued first and then the next and so on.<\/li>\n<li>Therefore the closing stock will be out of the latest (recent) lots and hence the stock will be valued at the rates of this lots.<\/li>\n<li>Closing stock can be valued from out of the latest (last) lots or by preparing date wise stores ledger, both approaches will give same valuation.<\/li>\n<li>In case of rising prices, the inventory will be valued at the latest i.e. higher prices and hence profit will be higher and cost of sales will be lower.<\/li>\n<li>In case of declining prices, the inventory will be valued at the latest i.e. lower prices and hence profit will be lower and cost of sales will be higher.<\/li>\n<\/ul>\n<p>LIFO (Last In First Out) method:<\/p>\n<ul>\n<li>In LIFO method it is assumed that the last lot (i.e., the last among the lots available at the time of issue) wall be issued first and then the previous lot and so on.<\/li>\n<li>Therefore the earlier lots will be in stock and hence the closing stock will be valued at those rates of earliest lots (i.e. oldest lots)<\/li>\n<li>In case of rising prices, the inventory will be valued at the oldest i e. lower prices and hence profit will be lower and cost of sales will be higher.<\/li>\n<li>In case of declining prices, the inventory will be valued at the oldest i.e. higher prices and hence profit will be higher and cost of sales will be lower.<\/li>\n<li>In this method the current (i.e. latest) cost gets charged against current revenue.<\/li>\n<li>In case of LIFO method the valuation of inventory from earliest lot will be followed only when date wise details of issue are not given.<\/li>\n<li>But if in the question the details of date-wise issues are given then more correctly the valuation should be made by preparing a date wise stores-Card. Both approaches can give different valuation.<\/li>\n<li>LIFO as a cost formula is not permitted by revised AS-2.<\/li>\n<\/ul>\n<p>Question 5.<br \/>\nM\/s. Subhalaxmi Traders find out the following historical cost and net realisable value for various types of inventories. Find out value of Closing Stock in accordance with AS-2 (Revised) &#8211; Valuation of Inventories issued by ICAI.<\/p>\n<table border=\"2\">\n<tbody>\n<tr>\n<td>Inventory Categories<\/td>\n<td>01<\/td>\n<td>02<\/td>\n<td>03<\/td>\n<td>04<\/td>\n<td>05<\/td>\n<td>06<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Historical Cost<\/td>\n<td>17,400<\/td>\n<td>20,100<\/td>\n<td>18,200<\/td>\n<td>16,500<\/td>\n<td>15,400<\/td>\n<td>21,400<\/td>\n<td>= 1,09,000<\/td>\n<\/tr>\n<tr>\n<td>Net Realisable Value<\/td>\n<td>12,200<\/td>\n<td>27,400<\/td>\n<td>19,100<\/td>\n<td>17,200<\/td>\n<td>16,800<\/td>\n<td>20,900<\/td>\n<td>= 1,13,600<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Solution:<br \/>\nAs per AS-2 (Revised), valuation of inventories must be at the lower of historical cost and Net Realisable value. Comparison between cost and net realisable value can be done individually on item-by-item basis or in the aggregate i.e. group-wise of similar and interchangeable items.<\/p>\n<p>But comparison by global basis is to be avoided. That is to say, total cost of all dissimilar items with their total net realisable value is not permitted. Hence, as per category-by-category comparison, we can determine value of inventories as under.<\/p>\n<table border=\"2\">\n<tbody>\n<tr>\n<td>Inventory Categories<\/td>\n<td>Lower of historical cost &amp; net realisable value<\/td>\n<\/tr>\n<tr>\n<td>01<\/td>\n<td>12,200<\/td>\n<\/tr>\n<tr>\n<td>02<\/td>\n<td>20,100<\/td>\n<\/tr>\n<tr>\n<td>03<\/td>\n<td>18,200<\/td>\n<\/tr>\n<tr>\n<td>04<\/td>\n<td>16,500<\/td>\n<\/tr>\n<tr>\n<td>05<\/td>\n<td>15,400<\/td>\n<\/tr>\n<tr>\n<td>06<\/td>\n<td>20,900<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td>1,03,300<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Thus, Value of closing stock is \u20b9 1,03,300.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Inventory Valuation \u2013 CA Foundation Accounts Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 6.<br \/>\nA firm has two products A and B. It analyses its costs for the products as follows:<\/p>\n<table border=\"2\">\n<tbody>\n<tr>\n<td><\/td>\n<td>A (\u20b9)<\/td>\n<td>B (\u20b9)<\/td>\n<\/tr>\n<tr>\n<td>Materials<\/td>\n<td>1,20,000<\/td>\n<td>1,40,000<\/td>\n<\/tr>\n<tr>\n<td>Labour<\/td>\n<td>80,000<\/td>\n<td>1,00,000<\/td>\n<\/tr>\n<tr>\n<td>Production Expenses<\/td>\n<td>70,000<\/td>\n<td>70,000<\/td>\n<\/tr>\n<tr>\n<td>Administration Expenses<\/td>\n<td>50,000<\/td>\n<td>50,000<\/td>\n<\/tr>\n<tr>\n<td>Advertising<\/td>\n<td>30,000<\/td>\n<td>30,000<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td>3,50,000<\/td>\n<td>3,90,000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Production was 20,000 units of A and 30,000 units of B. The selling price was \u20b9 20 per unit of A but the price of B was only \u20b9 10; agents in both cases received commission @ 5% of the selling price. The closing stock was 2,000 units and 3,000 units of A and B respectively. What is the value that should be put on the closing stock?<br \/>\nSolution:<br \/>\nStatement Showing Valuation of Stock as on &#8230;&#8230;&#8230;.<br \/>\nCost of Production<br \/>\n<img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-10312\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/12\/Inventory-Valuation-\u2013-CA-Foundation-Accounts-Study-Material-1.png\" alt=\"Inventory Valuation \u2013 CA Foundation Accounts Study Material 1\" width=\"614\" height=\"375\" srcset=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/12\/Inventory-Valuation-\u2013-CA-Foundation-Accounts-Study-Material-1.png 614w, https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/12\/Inventory-Valuation-\u2013-CA-Foundation-Accounts-Study-Material-1-300x183.png 300w\" sizes=\"(max-width: 614px) 100vw, 614px\" \/><\/p>\n<p>Question 7.<br \/>\nThe following are the details of a spare part of Sriram Mills:<\/p>\n<table border=\"2\">\n<tbody>\n<tr>\n<td>1-1-06<\/td>\n<td>Opening Stock<\/td>\n<td>Nil<\/td>\n<\/tr>\n<tr>\n<td>1-1<\/td>\n<td>Purchases<\/td>\n<td>100 units @ \u20b9 30 per unit<\/td>\n<\/tr>\n<tr>\n<td>15-1<\/td>\n<td>Issued for consumption<\/td>\n<td>50 units<\/td>\n<\/tr>\n<tr>\n<td>1-2<\/td>\n<td>Purchases<\/td>\n<td>200 units @ \u20b9 40 per unit<\/td>\n<\/tr>\n<tr>\n<td>15-2<\/td>\n<td>Issued for consumption<\/td>\n<td>100 units<\/td>\n<\/tr>\n<tr>\n<td>20-2<\/td>\n<td>Issued for consumption<\/td>\n<td>100 units<\/td>\n<\/tr>\n<tr>\n<td>1-3<\/td>\n<td>Purchases<\/td>\n<td>150 units @ \u20b9 50 per unit<\/td>\n<\/tr>\n<tr>\n<td>15-3<\/td>\n<td>Issued for consumption<\/td>\n<td>100 units<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Find out the value of stock as on 31-3-06 if the company follows:<br \/>\n1. First in First Out basis<br \/>\n2. Last in First Out basis<br \/>\n3. Weighted Average basis<br \/>\nSolution :<br \/>\nStores card\/Stores ledger<br \/>\nFifo Method:<br \/>\nItem &#8211; Spare parts \u2192 Method of Valuation of issues \u2192 FIFO<br \/>\n<img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-10313\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/12\/Inventory-Valuation-\u2013-CA-Foundation-Accounts-Study-Material-2.png\" alt=\"Inventory Valuation \u2013 CA Foundation Accounts Study Material 2\" width=\"611\" height=\"399\" srcset=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/12\/Inventory-Valuation-\u2013-CA-Foundation-Accounts-Study-Material-2.png 611w, https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/12\/Inventory-Valuation-\u2013-CA-Foundation-Accounts-Study-Material-2-300x196.png 300w\" sizes=\"(max-width: 611px) 100vw, 611px\" \/><br \/>\nWithout making stores card, if we simply value the stock of 100 units from the last lot because the earlier lots have been issued, we get the same valuation 100 units @ \u20b9 50\/- = \u20b9 5,000.<\/p>\n<p>Lifo Method:<br \/>\nItem &#8211; Spare parts \u2192 Method of Valuation of issues \u2192 LIFO<br \/>\n<img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-10314\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/12\/Inventory-Valuation-\u2013-CA-Foundation-Accounts-Study-Material-3.png\" alt=\"Inventory Valuation \u2013 CA Foundation Accounts Study Material 3\" width=\"612\" height=\"385\" srcset=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/12\/Inventory-Valuation-\u2013-CA-Foundation-Accounts-Study-Material-3.png 612w, https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/12\/Inventory-Valuation-\u2013-CA-Foundation-Accounts-Study-Material-3-300x189.png 300w\" sizes=\"(max-width: 612px) 100vw, 612px\" \/><br \/>\nAlternatively:<br \/>\nThe shortcut valuation of closing stock by LIFO i.e. without preparing stores card, would have been 100 units @30\/- = 3,000. It differs from the above valuation which is more correct if datewise issue is known.<\/p>\n<p>Weighted Average Method:<br \/>\nItem &#8211; Spare parts \u2192 Method of Valuation of issues \u2192 Weighted Average Method<br \/>\n<img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-10315\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/12\/Inventory-Valuation-\u2013-CA-Foundation-Accounts-Study-Material-4.png\" alt=\"Inventory Valuation \u2013 CA Foundation Accounts Study Material 4\" width=\"608\" height=\"307\" srcset=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/12\/Inventory-Valuation-\u2013-CA-Foundation-Accounts-Study-Material-4.png 608w, https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/12\/Inventory-Valuation-\u2013-CA-Foundation-Accounts-Study-Material-4-300x151.png 300w\" sizes=\"(max-width: 608px) 100vw, 608px\" \/><br \/>\nAlternatively periodic weighted average can be applied<br \/>\nsay quarterly weighted average = 3000 + 8000 + 7500\/100 + 200 + 150 = 41.11<br \/>\nClosing stock = 41.11 x 100 = 4111<\/p>\n<table border=\"2\">\n<tbody>\n<tr>\n<td><\/td>\n<td>Qty.<\/td>\n<td>Value<\/td>\n<\/tr>\n<tr>\n<td>Purchases<br \/>\nConsumption<\/td>\n<td>450<br \/>\n350<\/td>\n<td>18,500<br \/>\n14,389<\/td>\n<\/tr>\n<tr>\n<td>Closing Stock (Cost by weighted method)<\/td>\n<td>100<\/td>\n<td>4,111<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Question 8.<br \/>\nA manufacturer has the following record of purchase of a condenser which he uses while manufacturing radio sets:<br \/>\nPurchases were as follows:<\/p>\n<table border=\"2\">\n<tbody>\n<tr>\n<td>Date<\/td>\n<td>Quantity (Units)<\/td>\n<td>Price per (Unit)<\/td>\n<\/tr>\n<tr>\n<td>Dec-4<\/td>\n<td>900<\/td>\n<td>5.00<\/td>\n<\/tr>\n<tr>\n<td>Dec-10<\/td>\n<td>400<\/td>\n<td>5.50<\/td>\n<\/tr>\n<tr>\n<td>Dec-11<\/td>\n<td>300<\/td>\n<td>5.50<\/td>\n<\/tr>\n<tr>\n<td>Dec-19<\/td>\n<td>200<\/td>\n<td>6.00<\/td>\n<\/tr>\n<tr>\n<td colspan=\"3\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a02600<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Value the closing stock under different methods<br \/>\nIssues were made as follows<\/p>\n<table border=\"2\">\n<tbody>\n<tr>\n<td>Date<\/td>\n<td>Quantity (Units)<\/td>\n<\/tr>\n<tr>\n<td>Dec-5<\/td>\n<td>600<\/td>\n<\/tr>\n<tr>\n<td>Dec-12<\/td>\n<td>400<\/td>\n<\/tr>\n<tr>\n<td>Dec-29<\/td>\n<td>600<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Solution:<br \/>\nFifo Method:<br \/>\nItem &#8211; Condenser \u2192 Method of Valuation of issues \u2192 FIFO<br \/>\n<img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-10316\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/12\/Inventory-Valuation-\u2013-CA-Foundation-Accounts-Study-Material-5.png\" alt=\"Inventory Valuation \u2013 CA Foundation Accounts Study Material 5\" width=\"610\" height=\"450\" srcset=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/12\/Inventory-Valuation-\u2013-CA-Foundation-Accounts-Study-Material-5.png 610w, https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/12\/Inventory-Valuation-\u2013-CA-Foundation-Accounts-Study-Material-5-300x221.png 300w\" sizes=\"(max-width: 610px) 100vw, 610px\" \/><br \/>\nClosing Stock (Cost by FIFO method) 1000 5,000<br \/>\nWithout making stores card, if we simply value the stock of 1000 units from the last lots because the earlier lots have been issued, we get the same valuation 800 units @ 4.75\/- = \u20b9 3,800 and 200 units @ 6\/- = \u20b9 1,200.<\/p>\n<p>Lifo Method:<br \/>\nItem \u2192 Condenser \u2192 Method of Valuation of issues \u2192 LIFO<br \/>\n<img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-10317\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/12\/Inventory-Valuation-\u2013-CA-Foundation-Accounts-Study-Material-6.png\" alt=\"Inventory Valuation \u2013 CA Foundation Accounts Study Material 6\" width=\"612\" height=\"542\" srcset=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/12\/Inventory-Valuation-\u2013-CA-Foundation-Accounts-Study-Material-6.png 612w, https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/12\/Inventory-Valuation-\u2013-CA-Foundation-Accounts-Study-Material-6-300x266.png 300w\" sizes=\"(max-width: 612px) 100vw, 612px\" \/><br \/>\nThe shortcut valuation of closing stock by LIFO i.e. without preparing stores card, would have been 900 units @5 = 4,500 and 100 units @5.50 = 550. It differs from the above, which is more correct if date wise issue is known.<\/p>\n<p>Weighted Average Method:<br \/>\nItem \u2192 Condenser \u2192 Valuation of Issues \u2192 Weighted Average<br \/>\n<img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-10318\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/12\/Inventory-Valuation-\u2013-CA-Foundation-Accounts-Study-Material-7.png\" alt=\"Inventory Valuation \u2013 CA Foundation Accounts Study Material 7\" width=\"613\" height=\"311\" srcset=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/12\/Inventory-Valuation-\u2013-CA-Foundation-Accounts-Study-Material-7.png 613w, https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/12\/Inventory-Valuation-\u2013-CA-Foundation-Accounts-Study-Material-7-300x152.png 300w\" sizes=\"(max-width: 613px) 100vw, 613px\" \/><br \/>\nAlternatively periodic weighted average can be applied. It can be monthly, quarterly etc.<br \/>\nMonthly Weighted Average = \\(\\frac{5 \\times 900+5.5 \\times 400+5.5 \\times 300+6 \\times 200+4.75 \\times 800}{900+400+300+200+800}\\)<br \/>\n= \\(\\frac{4500+2200+1650+1200+3800}{2600}=\\frac{13350}{2600}\\)<br \/>\n= 5135<br \/>\nTherefore closing stock will be 1000 x 5.135 = 5135<\/p>\n<table border=\"2\">\n<tbody>\n<tr>\n<td><\/td>\n<td>Qty.<\/td>\n<td>Value<\/td>\n<\/tr>\n<tr>\n<td>Purchases<br \/>\nConsumption<\/td>\n<td>2,600<br \/>\n1,600<\/td>\n<td>13,350<br \/>\n8,215<\/td>\n<\/tr>\n<tr>\n<td>Closing Stock (Cost by LIFO method)<\/td>\n<td>1,000<\/td>\n<td>5,135<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Ascertaining closing stock by preparing trading account.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Inventory Valuation \u2013 CA Foundation Accounts Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 9.<br \/>\nFrom the following particulars for the years 2004 and 2005 determine the value of the closing stock at the end of 2005.<\/p>\n<table border=\"2\">\n<tbody>\n<tr>\n<td><\/td>\n<td>2004<br \/>\n\u20b9<\/td>\n<td>2005<br \/>\n\u20b9<\/td>\n<\/tr>\n<tr>\n<td>Opening Stock<br \/>\nPurchases<br \/>\nSales<\/td>\n<td>20,000<br \/>\n1,20,000<br \/>\n2,00,000<\/td>\n<td>30,000<br \/>\n1,90,000<br \/>\n2,40,000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Uniform rate of gross profit may be assumed.<br \/>\nAt the end of 2005, goods purchased were received, but no entry was made for this credit purchase since invoice was not received. These goods cost \u20b9 20,000.<br \/>\nSolution:<br \/>\nClosing stock of 2005 can be ascertained by preparing Trading a\/c but gross profit ratio for 2005 is not given hence the same is ascertained by preparing Trading a\/c of 2004. For this remember the closing stock of this year is the opening stock of next year.<br \/>\nTrading Account:<br \/>\nFor the year ending 31st December, 2004<br \/>\n<img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-10319\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/12\/Inventory-Valuation-\u2013-CA-Foundation-Accounts-Study-Material-8.png\" alt=\"Inventory Valuation \u2013 CA Foundation Accounts Study Material 8\" width=\"609\" height=\"224\" srcset=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/12\/Inventory-Valuation-\u2013-CA-Foundation-Accounts-Study-Material-8.png 609w, https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/12\/Inventory-Valuation-\u2013-CA-Foundation-Accounts-Study-Material-8-300x110.png 300w\" sizes=\"(max-width: 609px) 100vw, 609px\" \/><\/p>\n<p>Trading Account:<br \/>\nFor the year ending 31st December, 2005<br \/>\n<img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-10320\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/12\/Inventory-Valuation-\u2013-CA-Foundation-Accounts-Study-Material-9.png\" alt=\"Inventory Valuation \u2013 CA Foundation Accounts Study Material 9\" width=\"608\" height=\"189\" srcset=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/12\/Inventory-Valuation-\u2013-CA-Foundation-Accounts-Study-Material-9.png 608w, https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/12\/Inventory-Valuation-\u2013-CA-Foundation-Accounts-Study-Material-9-300x93.png 300w\" sizes=\"(max-width: 608px) 100vw, 608px\" \/><br \/>\nUniform Rate of gross Profit = 45% is taken from 2004. Stock as on 31-12-2005 including goods for which invoice was not accounted is \u20b9 1,08,000<br \/>\nAscertaining Stock, when stock of different date is known (Stock of latter date is known)<\/p>\n<p>Question 10.<br \/>\nX who was closing his books on 31-3-2006 failed to take the actual Stock which he did only on 9th April, 2006, when it was ascertained by him to be worth \u20b9 25,000. It was found that sales are entered in the sales book on the same day of dispatch and return inwards in the return book as and when the goods are received back. Purchases are entered in the purchases day book once the invoices are received.<\/p>\n<p>It was found that sales between 31-3-2006 and 9-4-2006 as per the sales day book are \u20b9 1,720. Purchases between 31-3-2006 and 9-4-2006 as per purchases day book are \u20b9 120, out of these goods amounting to \u20b9 50 were not received until after the stock was taken. Goods invoiced during the month of March, 2006 but goods received only on 4th April, 2006 amounted to \u20b9 100. Rate of gross profit is 33 1\/3% on cost.<br \/>\nAscertain the value of physical stock as on 31-3-2006.<br \/>\nSolution:<\/p>\n<table border=\"2\">\n<tbody>\n<tr>\n<td rowspan=\"3\">Stock on 9-4-2006<br \/>\nAdd: Cost of goods sold (1720\/ 100) x 75<br \/>\nNote: Profit 33 1\/3% on cost = 25% on sale<br \/>\nLess: Goods purchased and received (120-50)<br \/>\nLess: Goods purchased in March but received on 4-4-06<br \/>\nPhysical stock on 31-3-06<br \/>\nAdd: Stock in transit (purchased but not received till 31-3-06)<br \/>\nClosing stock for final a\/c.<\/td>\n<td>25,000<br \/>\n+ 1,290- 70<br \/>\n&#8211; 100<\/td>\n<\/tr>\n<tr>\n<td>26120<br \/>\n+ 100<\/td>\n<\/tr>\n<tr>\n<td>26,220<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Ascertaining stock, when stock of different date is known (Stock of earlier date is known).<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Inventory Valuation \u2013 CA Foundation Accounts Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 11.<br \/>\nA trader prepared his accounts on 31st March, each year. Due to some unavoidable reasons, stock taking was done on 15th March, 2006 on which date the total cost of goods in his godown came to \u20b9 50,000. The following facts were established between 15th March and 31st March, 2006.<br \/>\n(a) Sales \u20b9 41,000 (including cash sales \u20b9 10,000)<br \/>\n(b) Purchases \u20b9 5,034 (including cash purchases \u20b9 1,990)<br \/>\n(c) Sales Returns \u20b9 1,000<br \/>\nGoods are sold by the trader at a profit of 209&amp; on sales.<br \/>\nYou are required to ascertain the value of stock on hand on 31st March, 2006.<br \/>\nSolution:<br \/>\nStatement showing the Valuation of Stock as on 31st March, 2006:<\/p>\n<table border=\"2\">\n<tbody>\n<tr>\n<td rowspan=\"3\">A Stock in godown (Physical inventory) as on 15-3-06<br \/>\nB Less: (a) Cost of sales between 15.3 to 31.3 net of return 80% of (\u20b9 41,000 &#8211; \u20b9 1,000)<br \/>\nC Add: (a) Purchases during the period<br \/>\nD Stock as on March 31, 2006 (at cost)<\/td>\n<td>\u20b9<\/td>\n<\/tr>\n<tr>\n<td>50,000<br \/>\n&#8211; 32,000<br \/>\n+ 5,034<\/td>\n<\/tr>\n<tr>\n<td>23,034<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Question 12.<br \/>\nRaj Ltd. prepared their accounts for financial year ended on 31st March 2019. Due to unavoidable circumstances actual stock has been taken on 10th April 2019, when it was ascertained at \u20b9 1,25,000. It has been found that;<br \/>\n(i) Sales are entered in the Sales Book on the day of dispatch and return inwards in the Returns Inward Book on the day of the goods received back.<br \/>\n(ii) Purchases are entered in the Purchase Book on the day the Invoices are received.<br \/>\n(iii) Sales between 1st April 2019 to 9th April 2019 amounting to \u20b9 20,000 as per Sales Day Book.<br \/>\n(iv) Free samples for business promotion issued during 1st April 2019 to 9th April 2019 amounting to \u20b9 4,000 at cost.<br \/>\n(v) Purchases during 1st April 2019 to 9th April 2019 amounting to 110,000 but goods amounts to \u20b9 2,000 not received till the date of stock taking.<br \/>\n(vi) Invoices for goods purchased amounting to Rs. 20,000 were entered on 28th March 2019 but the goods were not included in stock.<br \/>\nRate of Gross Profit is 2596 on cost.<br \/>\nAscertain the value of Stock as on 31st March 2019.<br \/>\nSolution:<\/p>\n<table border=\"2\">\n<tbody>\n<tr>\n<td><\/td>\n<td>\u20b9<\/td>\n<\/tr>\n<tr>\n<td>Stock as on 10th April, 2019<br \/>\nAdd: Cost of Goods sold (\\(\\frac { 20,000 }{ 100 }\\) x 80)<br \/>\n[Note:- Profit 25% on cost = 20% on sale]<br \/>\nAdd: Free samples distributed<br \/>\nLess: Goods purchased &amp; received (10,000 &#8211; 2,000)<br \/>\nAdd: Invoices entered but goods not included in stock<\/td>\n<td>1,25,000<br \/>\n16,000<br \/>\n4,000<br \/>\n8,000<br \/>\n20,000<\/td>\n<\/tr>\n<tr>\n<td>Stock as on 31st March, 2019<\/td>\n<td>1,57,000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><strong>True or False<\/strong><\/p>\n<p>Question 1.<br \/>\nDamaged inventory should be valued at cost or market price, whichever is lower.<br \/>\nAnswer:<br \/>\nFalse: Damaged inventory should be valued at net realizable value only.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Inventory Valuation \u2013 CA Foundation Accounts Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 2.<br \/>\nFinished goods are normally valued at cost or market price whichever is higher.<br \/>\nAnswer:<br \/>\nFalse: As per AS-2, finished goods are normally valued at cost or net realizable value whichever is lower.<\/p>\n<p>Question 3.<br \/>\nThe inventory under AS-2 is valued on the basis of cost price or current replacement cost, whichever is less.<br \/>\nAnswer:<br \/>\nFalse: As per AS-2, Valuation of Inventories, inventory is valued at the lower of cost and net realizable value.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Inventory Valuation \u2013 CA Foundation Accounts Study Material\u00a0is designed strictly as per the latest syllabus and exam pattern. Inventory Valuation \u2013 CA Foundation Accounts Study Material Question 1. Periodic inventory system Answer: Periodic\/Physical inventory system No records of inventory are maintained. Inventory is ascertained by physical counting at the end of the year and then &hellip;<\/p>\n<p class=\"read-more\"> <a class=\"\" href=\"https:\/\/gstguntur.com\/inventory-valuation-ca-foundation-accounts-study-material\/\"> <span class=\"screen-reader-text\">Inventory Valuation \u2013 CA Foundation Accounts Study Material<\/span> Read More &raquo;<\/a><\/p>\n","protected":false},"author":2,"featured_media":12275,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"spay_email":"","footnotes":""},"categories":[160],"tags":[],"jetpack_featured_media_url":"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/12\/Inventory-Valuation-\u2013-CA-Foundation-Accounts-Study-Material.png","_links":{"self":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/10310"}],"collection":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/comments?post=10310"}],"version-history":[{"count":5,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/10310\/revisions"}],"predecessor-version":[{"id":12273,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/10310\/revisions\/12273"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/media\/12275"}],"wp:attachment":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/media?parent=10310"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/categories?post=10310"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/tags?post=10310"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}