When you record the purchase on the basis of Quantity sold, it will be not possible to follow FIFO or LIFO method of Valuation of Inventories. Here the company will be violating AS-2:Valuation of Inventories.
Additionaly the section 209 of the companies act will not be followed, Which requires a company to maintain proper records to show I) Receipts and Payments II) purchase and sales III) Record of assets IV) costing records if specified for the class of company
CAclubindia
