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CA Foundation · Accounting · Inventories

Under AS 2 (Valuation of Inventories), which of the following items is deducted from the purchase price when determining the cost of purchase of inventories?

Trade discounts and rebates are deducted from the purchase price under AS 2. Freight inward, non-recoverable import duties and octroi are directly attributable costs of bringing goods to their present location, so they are added to the cost of purchase rather than deducted from it.

  1. AFreight inward paid to the transporter
  2. BImport duties that are not subsequently recoverable from tax authorities
  3. CTrade discounts and rebates receivedCorrect
  4. DOctroi paid on the goods brought into the town

Explanation

Cost of purchase includes the purchase price, non-recoverable duties and taxes, freight inward and other directly attributable costs, less trade discounts, rebates and similar items. Freight, non-recoverable import duty and octroi are all added, so only trade discounts and rebates are deducted.

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