While determining the cost of inventory, certain costs are excluded and treated as expenses. If so …
While determining the cost of inventory, certain costs are excluded and treated as expenses. If so could you provide examples of such costs as per AS 2 Valuation of Inventories.
Yes, as per the accounting standard per AS 2 Valuation of Inventories certain costs are excluded from the cost of the inventories and are recognised as expenses in the period in which incurred.
The followings are the examples of such costs:
(a) Abnormal amount of wasted materials, labour, or other production costs;
(b) Storage costs, unless those costs are necessary in the production process prior to a further production stage;
(c) Administrative overheads that do not contribute to bringing the inventories to their present location and condition; and
(d) Selling and distribution costs.
