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CA Foundation · Accounting · Inventories

Under AS 2 (Valuation of Inventories), which of the following items is included in the cost of purchase of raw materials?

Import duties and non-refundable taxes paid on purchase are included in the cost of purchase under AS 2. Trade discounts are deducted from cost, while post-receipt storage and selling expenses are not part of the cost of inventories.

  1. AImport duties and non-refundable taxes paid on purchaseCorrect
  2. BTrade discounts received, added to the invoice price
  3. CStorage costs incurred after the materials are received in the godown
  4. DSelling expenses of the finished goods

Explanation

Cost of purchase includes the purchase price, import duties and other non-refundable taxes, freight inward and other directly attributable costs, less trade discounts, rebates and similar items. Trade discounts are deducted, not added. Storage after receipt (unless necessary in the production process) and selling expenses are excluded.

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