4th Question: It May be Relevant for May 2011 Exam

Provision for Non- Moving Stock

Question:

The management of Spsmiter Pvt. Ltd. wants to make a provision of the non moving stock based on the Technical evaluation. The company follows the principle of making the provision based on no issue for the last 12 months upto 31^st March, 2010.

The following details are as under:           

            The value of stock                                           Rs. 55,99,500

            Prov. Based on 12 months issue                      Rs.   1,00,000

            Prov. Based on Technical evaluation                Rs.      70,000

What is your opinion on the management decision and can it be treated as the change in the accounting policy ?

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