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Inventory Valuation

CA Sapna Ghelani (Chartered Accountant) (7550 Points)

18 March 2021

When we change the valuation of inventory , how will we adjust the difference in our accounts ?

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4 Replies

Chiranjivi Nagpal (6 Points)
Replied 18 March 2021

Taking PL effect and adjusting the inventory

CA. Sourav Sarkar (Chartered Accountant ) (24588 Points)
Replied 18 March 2021

Adjust the difference in closing stock of inventories in
P/L and also in balance sheet by calculating the previous methods last balance of inventory and the current method of valuation because it is a change in accounting policy

Chiranjivi Nagpal (6 Points)
Replied 18 March 2021

Inventory adjustment ledger can be opened if there are multiple entries or entries are posted every month/quarter... then at the end of the reporting period route through PL.. see if there is gain or loss on valuation of inventory again

anil jain (Partner) (1072 Points)
Replied 18 March 2021

Do inventory is entered in books.

As per my opinion only sales and purchases are routed through books.

Value of inventory is entered as closing stock in Trading and P&L (cr item) and also in BS (dr item) nullifying the impact on TB/PL/BS.

If you change the method of valuation the impact is reported in notes to account per requirement of AS, and impact is not routed through P&L. Impact is automatically affect the PL and BS through "entered as closing stock in Trading and P&L (cr item) and also in BS (dr item)"