stock valuation

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This query is : Resolved

A J Sankar (Querist)

12 November 2008 While valuing stock as per AS 2 if NRV is less than cost , NRV is considered as the stock value. Here how the stock value is reduced by entries(how to provide such loss).

Deepak Agrawal

Deepak Agrawal (Expert)

12 November 2008 U have to show loss as consumption.
So u have to pass consumption entry

A J Sankar

A J Sankar (Querist)

12 November 2008 What does it mean?
Ok what will be the consumption entry? please mention.

Deepak Agrawal

Deepak Agrawal (Expert)

12 November 2008 It will be
consumption a/c debit
to inventory account.

Let me know what accounting system you are using ?

A J Sankar

A J Sankar (Querist)

12 November 2008 Its ok.
But the same invetory has to be effected in B/S.
Then how it will be.?
Is the consumption (ie debit in above) is deducted from inventory in B/s.

Deepak Agrawal

Deepak Agrawal (Expert)

12 November 2008 Yes because p/l stock will move to balance sheet

A J Sankar

A J Sankar (Querist)

13 November 2008 Its ok. Suppose there are no transactions in the later year. But stock cost is less than the NRV, then we have to raise the stock value to cost(ie since earlier it is less than the cost).
Then what are the entries to be passed to make the stock to such value.

Deepak Agrawal

Deepak Agrawal (Expert)

13 November 2008 Then u have to furter lowwer down by passing same enteries

A J Sankar

A J Sankar (Querist)

13 November 2008 Oh! I mean

suppose first year cost 100
NRV =90
second year cost = 100
NRV = 110.

This is the situation i wanted to tell u.
So please tell me the entries

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)

13 November 2008 It is not cost. It is revluation less than cost. Therefore you have to make the query clear, dear.

A J Sankar

A J Sankar (Querist)

13 November 2008 If, once stock is reduced to NRV(as the nrv is less than cost), is it become cost of stock(ie reduced value) for next period?

Pleae clarify me about words used by you that "It is revaluation less than cost".

I hope U understand my view by above example.

Deepak Agrawal

Deepak Agrawal (Expert)

13 November 2008 U have to pass the opposite entry what u passed for devaluation of stock

A J Sankar

A J Sankar (Querist)

13 November 2008 Its ok deepu sir. Thanks for ur answer.
Let me know the meaning of the words quoted above by s.srinivasaraghavan sir.

Deepak Agrawal

Deepak Agrawal (Expert)

13 November 2008 he has told meaning of NRV.
It is realisation - Cost

A J Sankar

A J Sankar (Querist)

13 November 2008 thank q