Inventory is something which is stored or coverted from raw material for sale in normal course of business. However if any company has produced 100 cars and sent to its distributors, for distributor 100 cars are inventory and from 1, he is using as demo car.
So this demo car is still will be counted in his inventory. howvere this can be categorised as inventory held not for sale. Further when you like, can sell this asset and reduce the stock of inventory. There will be no problem at all.
11 October 2013
Its not require always to take RC for demo vehicle, Some Distributors take RC some does not. According to me if you have permanently decided to use that car as DEMO car and you will not sell in near future, then its better to reduce it from inventory and show it as FA, and charge Depreciation as per the rate. Now when you will sell it say after 2 years 5 years, Book value and Realisable value will be compared and book loss or profit on sale of fixed asset accordingly an in this case you can take RC if you want and have to show that you have purchased that car for your own purpose at market value..
CAclubindia
