as 2 | Accounts Query

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Q. > Please Help: as 2

460 views • Question added Sep 30, 2011 • Accounts • By anu jain , bahadurgarh

A co has 100 switch boards in stock at the b/s date, 31.03.2008. The switchboard is valued at net realizable value since their cost of manufacturing is very high. Of the 100 switchboards, 60 were sold at RS 5000 each before signing the accounts. 40 switchboards were in stock at the date of signing of accounts when the sales price was estimated at RS 4500. Of the 40 switch board, 20 were under a contract at RS 4000 each and the other 20 were to be solved in the following month when the price is expected to be at RS 4800each. Determine the value of stock on 31st march, 2003.
Ans - 60*5000+ 20* 4800+ 20*4000= 476000.
What is the meaning of date of signing of acc and what is relevance here…..

2 Answers

answered Sep 30, 2011 by Ashish Karundia , New Delhi

Dear Anu,

The significance of date of signing of account is that you have to consider all the subsequent events / developments till the date of signing of the accounts. In other words, you have to take care of all the changes/events that took place between the closing of accounts (i.e. for example 31st March) and date of signing (i.e. for ex. 30th September). Further, you can read AS-5 and SA-560 in this regard.

In the given example lets assume that for the rest 20 watches you were not having any order, then the same would have been valued at 4500 and not at 4800. Hope this suffice your answer.

answered Sep 30, 2011 by Ashish Karundia , New Delhi

Dear Anu,

I would request you to see the replies carefully. The answer is 4800 because at the time of signing you were aware that the same can be sold at 4800 (i.e. the realizable value is 4800).

Further, I have given 4500 on the assumption that you do not know on the signing date that it will be sold at Rs. 4800. Please read the answers carefully ANU.

Comments

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anu jain

30-Sep-2011 , 09:55:46 pm

i was also thinking of taking 4500 instead of 4800 but by takng it at 4500 ans is nt tally with book ans and its given in praveen sharma sir book..

CA VIPIN GARG

01-Oct-2011 , 08:46:16 am

Surely it should be taken as Rs. 4500 and NOT 4800 because you doesnot have any contract for the same it is just your expectation that the market price in the upcoming month will going to be rise. Further we do our accounting as per conservatism principle and accordingly, in my opinion there is no reason of taking the value other than Rs. 4500/- Hope you got the answer you were looking, have a very nice day Anu Ji and Ashish Ji.............