Inventory

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CMA Omkar.TIlve (Querist)

11 August 2012 Hi,
I was analyzing FS of Tata Motors and was unable to figure out the treatment of inventory in the income statement.

When i saw B/S there was increase in inventory 696.84 and the same reflected in the cash flow statement

The inventory figure in the income statement was given as [Changes in inventory of FG,WIP and pdt for sale (623.84)]

Question
1.what does the negative number in income indicate
2.Does this have any relation to the number mentioned in B/S

Please Explain

Thanks in advance

Sanjay Chauhan (IFRS)

Sanjay Chauhan (IFRS) (Expert)

12 August 2012 Negative number means increase in inventory during the period. It means that that prodcued more during the peirod whihc could not be sold.

The inventiry balance is mmore than the balance carried forward last year.

CMA Omkar.TIlve

CMA Omkar.TIlve (Querist)

13 August 2012 But how come it is put on the expense side of the income statement....and moreover it is adding up in the profit...

Sanjay Chauhan (IFRS)

Sanjay Chauhan (IFRS) (Expert)

13 August 2012 It is because the cost of purhcase / production is debited as expenditure.

It is either presented on credit side or negative in debit side.

However, revised schedule VI also now prescribes the debit side treatmet.

The principle is Matching cost against revenue. If teh goods are not sold in the period, the cost of suhc also should be excluded. SInce the purhcase is shown as gross in the expense side, the cost of inventory part of that line item is valued sepeartely at cost and reduced from curent period's P&L.

Message likes : 1 times

CMA Omkar.TIlve

CMA Omkar.TIlve (Querist)

13 August 2012 cant get a better explanation...Thank you very much.

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