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Inventory loss during trail run

Others 716 views 1 replies

Sandeep Jindal

Student

31 Points Joined December 2008

Dear Members,

I have some Query regarding Raw material Inventory.

A company purchased some material worth Rs. 500 Crores before start of commercial production when the commercial production starts the fair value of that material will be Rs. 300 Crores only.Can the company treat that loss in its Profit and loss account or have to treat in preoperative accounts.

Please respond me as early as possible.

Sandeep Jindal

Replies (1)

raghunathan

employed

29 Points Joined January 2009

The loss mentioned in your query is an economic loss and not a loss due to production during trial period. The loss therefore should be dealt with in P&L account and not to be treated as pre-operative expense and add to the value of the asset.