Stock valuation
This query is : Resolved
05 May 2009
Hi,
A company imports some Raw material say for Rs 1cr and pays 5lk as freight and other incidental expenses. Now, at the year end say 40% percent of this R/M lies unused. Firstly, i would like to ask that how the freight exp be shown in books? Shd it be debited to Purchase a/c or be it debited to Carriage Inward A/c? Now, How the closing stock of Raw Material be valued.? Shd the proportionate freigh cost be also added in actual cost or what?
A company imports some Raw material say for Rs 1cr and pays 5lk as freight and other incidental expenses. Now, at the year end say 40% percent of this R/M lies unused. Firstly, i would like to ask that how the freight exp be shown in books? Shd it be debited to Purchase a/c or be it debited to Carriage Inward A/c? Now, How the closing stock of Raw Material be valued.? Shd the proportionate freigh cost be also added in actual cost or what?
05 May 2009
Yes Proportionate freight cost should be added in actual cost. For your knowledge I am pasting here Para 7 of AS 2:-
Costs of Purchase
7. The costs of purchase consist of the purchase price including duties
and taxes (other than those subsequently recoverable by the enterprise from
the taxing authorities), freight inwards and other expenditure directly
attributable to the acquisition. Trade discounts, rebates, duty drawbacks and
other similar items are deducted in determining the costs of purchase
Costs of Purchase
7. The costs of purchase consist of the purchase price including duties
and taxes (other than those subsequently recoverable by the enterprise from
the taxing authorities), freight inwards and other expenditure directly
attributable to the acquisition. Trade discounts, rebates, duty drawbacks and
other similar items are deducted in determining the costs of purchase
05 May 2009
Freight may be debited in carriage inward's in the books of accounts. stock valuation is rightly explained by Mr.Aryendra.
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