R. KANDASUBRAMANIAN
asked about 2 years ago
how to reconcile closing stock -31.3.2016 with ICDS need practical aspects
Anil
answered about 2 years ago
Hie This Income Computation and Disclosure Standard is applicable for computation of income chargeable under the head “Profits and gains of business or profession” or “Income from other sources” and not for the purpose of maintenance of books of accounts. If there is any conflict between the provisions of the Income-tax Act, 1961 ICDS, then provisions of the Act shall prevail. Valuation of Inventories under ICDS is similar to Valuation under AS-2 except for the 2 things mentioned below 1. Standard Cost method of valuation is allowed under AS-2 for valuation of inventories however same is not accepted as valuation method under AS-2. 2. In case of dissolution of a partnership firm or association of person or body of individuals, whether business is discontinued or not, the inventory on the date of dissolution shall be valued at the net realizable value. Whereas in case of AS-2 if is business is continued then valuation can be done as cost or NRV whichever is lower.
Dear Sir thanks for your reply to us r kandasubramanian
Shreedhar Sutar
answered about 2 years ago
Hi R. Kandasubramanian, This Income Computation and Disclosure Standard is applicable for computation of income chargeable under the head “Profits and gains of business or profession” or “Income from other sources” and not for the purpose of maintenance of books of accounts. If there is any conflict between the provisions of the Income-tax Act, 1961 ICDS, then provisions of the Act shall prevail. Valuation of Inventories under ICDS is similar to Valuation under AS-2 except for the 2 things mentioned below 1. Standard Cost method of valuation is allowed under AS-2 for valuation of inventories however same is not accepted as valuation method under AS-2. 2. In case of dissolution of a partnership firm or association of person or body of individuals, whether business is discontinued or not, the inventory on the date of dissolution shall be valued at the net realizable value. Whereas in case of AS-2 if is business is continued then valuation can be done as cost or NRV whichever is lower.
Respected Sir thanks for your response in the case of ICDS, it is stated that stock of inventory includes expenses and also includes VAT etc. As such, how to reconcile closing inventory as per BS and ICDS at present, not included VAT in Closing Inventory
Dear Sir, Section 145 of the income tax states inventory valuation should be done inclusive of taxes whereas AS 2 values inventory excluding AS-2. But the same is revenue neutral. The presentation only differs however impact on the profit & loss account is same.
Dear Sir thanks for your immediate reply
