Skip to content

CA Foundation · Accounting · Inventories

Under AS 2, which of the following items of inventory must have its cost determined using the specific identification of individual costs, rather than FIFO or weighted average?

Goods segregated for a specific project, such as a custom-built machine, need specific identification under AS 2. Such items are not ordinarily interchangeable and their costs can be traced individually. Identical bulk items like bolts, cement or paper reels use FIFO or weighted average instead.

  1. AIdentical bolts bought in bulk lots and held in a godown
  2. BGoods segregated for a specific project, such as a custom-built machine ordered by a customerCorrect
  3. CCement bags purchased at different prices through the year
  4. DPrinting paper reels of the same grade bought in several lots

Explanation

AS 2 requires specific identification for items that are not ordinarily interchangeable and for goods produced and segregated for specific projects. Bulk-purchased identical items such as bolts, cement or paper reels are interchangeable, so FIFO or weighted average is used for them.

Did you get it right without looking?

One question tells you little. A timed set on Inventories shows your real accuracy, how long you take and where you lose marks.

Practise InventoriesFree diagnostic mock

More Inventories questions