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CMA Intermediate · Corporate Accounting and Auditing · Inventories (Ind AS 2)

Which of the following items would qualify as 'inventories' in the books of Ramesh Pumps Ltd, a manufacturer of pumps, under Ind AS 2?

Raw materials and consumable supplies qualify as inventories. Ind AS 2 defines inventories to include assets in the form of materials or supplies to be consumed in the production process, whereas machines, trucks and investment land are not held for sale or consumption in production.

  1. AA CNC machine bought for use in the factory for many years
  2. BRaw materials and consumable supplies to be used in the production processCorrect
  3. CLand held by the company as a long-term investment for appreciation
  4. DA delivery truck used to transport finished pumps to dealers

Explanation

Inventories include assets held for sale in the ordinary course, in the process of production for such sale, or in the form of materials or supplies to be consumed in production. Raw materials and consumables meet limb (c). The CNC machine and truck are used over several periods, and land held for appreciation is not held for sale in ordinary business.

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