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CA Foundation · Accounting · Inventories

Which of the following is NOT excluded from the scope of AS 2, so that it is valued under AS 2?

Furniture held for sale is finished goods and is valued under AS 2. The other items fall outside it: shares and debentures held as stock-in-trade are financial instruments, machinery spares used with a fixed asset are not inventories, and producers' harvested produce is measured differently.

  1. AShares and debentures held as stock-in-trade by a dealer
  2. BMachinery spares that are used only in connection with a fixed asset
  3. CLivestock and agricultural produce held by a producer after harvest
  4. DStock of a dealer in newly manufactured furniture held for saleCorrect

Explanation

Newly manufactured furniture held for sale is finished goods and is valued under AS 2. Financial instruments such as shares and debentures are excluded from AS 2 even when held as stock-in-trade. Producers' livestock and agricultural produce and minerals are excluded to the extent they are measured at net realisable value under established practice. Option B is not an inventory since it is a fixed asset spare.

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