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determination of scrap

yash doshi (article) (41 Points)

07 July 2008

what is the definition of scrap???????

how should we determine that any material lying in the godown at the end of the year is scrap or closing stock???

suppose that i m a dealer in cloth, i purchase 100mm cloth out of which i use 95mm for production and i want to consider the other 5mm as scrap but the income tax officer says that it should be considered as closing stock of raw material

so what should i consider the 5 mm cloth (scrap or closing stock of raw material)????

are there any guidelines issued regarding how should we determine scrap????

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3 Replies

Late CA Sampat Jain (Chartered Accountant) (4772 Points)
Replied 07 July 2008

scrap

Definition

Waste that either has no economic value or only the value of its basic material content recoverable through recycling.

Mohit (Practicing Chartered Accountant) (80 Points)
Replied 07 July 2008

well that is ur closing stock only since its not a waste. A scrap is a wastage in production which can b recycled.

Siddharth Ladha (Tower) (0 Points)
Replied 07 July 2008

well the defibnition says scrap is the one which has no realisable value.so going by the definition and take into consideration the scenario 5 % material if is of no use than the same should be valued as a scrap or if the same can be used in the production of the goods than the same should be considered as a raw material and will come under the scope of closing stock