2023 · Q36
Which of the following is included in the ‘Cost of Inventory’ according to Accounting Standard-2 (Inventory Valuation)?
General Accounting Principles, Auditing and InsuranceAccounting concepts and conventions
- AAdministrative overheads that do not contribute to bringing the inventories to their present location and condition
- BStorage costs which are necessary in the production process prior to a further production stage
- CSelling and distribution costs
- DDuties and taxes paid on purchases, subsequently recoverable by the enterprise from the Tax Authorities
Explanation
Under AS-2 (Valuation of Inventories), the cost of inventory comprises all costs of purchase, costs of conversion, and other costs incurred in bringing the inventories to their present location and condition. Storage costs that are necessary in the production process before a further production stage are specifically included. Administrative overheads that do not contribute, selling and distribution costs, and duties/taxes recoverable from tax authorities are all excluded. Hence (b) is correct.