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CA Foundation · Accounting · Inventories

Kapoor Industries reports closing inventories as follows: raw materials ₹3,20,000; work-in-progress ₹1,80,000; finished goods ₹4,50,000; stores and spares ₹50,000. Under AS 2, which statement about disclosure of the carrying amounts is correct?

AS 2 requires the total carrying amount of inventories to be disclosed along with a classification appropriate to the enterprise, such as raw materials, work-in-progress, finished goods, and stores and spares. A single undifferentiated total is insufficient, and valuation is at lower of cost and net realisable value.

  1. AOnly the total of ₹10,00,000 needs to be shown, with no classification
  2. BThe carrying amounts should be shown in classifications appropriate to the enterprise, such as raw materials, WIP and finished goodsCorrect
  3. COnly finished goods need to be disclosed because they are sold to customers
  4. DRaw materials must be shown at selling price, others at cost

Explanation

AS 2 requires disclosure of the total carrying amount of inventories and its classification appropriate to the enterprise, such as raw materials and components, WIP, finished goods, and stores and spares. Showing only a total (option A) does not meet the requirement. Inventories are valued at the lower of cost and net realisable value, not at selling price.

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