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IAS 2 (inventories) set out the accounting treatment for inventories, including the determination of cost, the subsequent recognition of the expense and any write-down to Net Realizable Value (NRV)

So what is the inventory?

Inventory according to IAS 2 are assets that are :

  • Held for sale in the ordinary course of business
  • are in the process of production for
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9 benefits of marginal costing

9 benefits of marginal costing.

Marginal or direct costing is the accounting system in which variable costs are charged to cost units and fixed costs of the period are written off in full against the aggregate contribution.

Arguments for (benefits)  the use of marginal or direct costing include the following:

  • For non-profit planning purposes, management requires cost volume and profit relationship data, which
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What is the purpose of attending an inventory count?

The auditor should attend inventory counts by the client for the following reasons

  • Tests of control. To ensure that the inventory count is carried out by the client entity’s employees in accordance with their instructions. Also to look for any control weaknesses in the inventory counting system
  • Substantive tests. To ensure that there is no material misstatement at the assertion
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Revision question on financial accounting – IAS 2 (Esinam ltd)

Esinam Ltd has the following products in inventory at the end of 2016:

  Units Cost per unit Tsh
Ahomka (completed) 5,400 22
Adonko (part complete) 2,800 26

Each product normally sells at Tsh 34 per unit. Due to the difficult trading conditions, Esinam Ltd intends to offer a discount of 15% per unit and expects to incur Tsh 4 … Read the rest

Revision question on Financial accounting – IAS 2.

The objective of IAS 2 Inventories is to prescribe the accounting treatment for inventories and provide guidance for measuring and valuation of inventories. It determines the cost of inventories and subsequent recognition as an expense, including any write-down to net realisable value.


i)   Explain Inventories. 

ii)  Explain how inventories are measured and valued in … Read the rest