Abstract

Anirudh, an electronics and electrical engineering graduate, started a solar items manufacturing unit Anirudh Solar Energy Solutions (ASES). ASES commenced its operations on January 01, 2019, to manufacture three categories of Solar LED Lanterns. However, the production operations did not commence as planned and hence ASES incurred some additional expenses. ASES did not sell any products till the end of March 31, 2019. Anirudh started planning the activities for the next financial year 2019-20, after lining up some active orders. But before proceeding, Anirudh needed to evaluate the value inventory lying in stock and decide on adjusting the available stock to meet the production and delivery of the new orders. The present case study can be used to discuss the process of valuing inventory based on the principles mentioned in Accounting Standard-2 (Inventory Valuation) and also to discuss the accounting treatment of exceptional items in valuing the inventory as per Accounting Standard-2.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Understand the application of Accounting Standard-2 (Inventory Valuation)
• Understand the process of determining the value of inventories in financial statements
• Study the Exceptional items in inventory valuation

Keywords

Accounting; Accounting principles; Accounting Concepts; Accounting Standard-2; Inventory Valuation; Net Realizable value; Total Value of Inventory; Decision-making; Profit and loss account; balance sheet; Accounting treatment for Exceptional items in valuing inventory