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    AS 2 (Objective Questions)

    Uploaded by

    Nikhil Karkhanis
    This document summarizes key aspects of Accounting Standard 2 (AS-2) in India as established by the Institute of Chartered Accountants of India (ICAI). It includes 14 multiple choice questions and 8 true/false statements related to the standard's definitions and treatment of inventory. Key points covered include: - AS-2 defines inventory and establishes that it should be valued at the lower of cost or net realizable value - Inventory cost includes all conversion costs required to bring the inventory to its present condition - The costs of inventory items that are not ordinarily interchangeable should be valued using their specific individual costs - Acceptable cost flow methods for valuing inventory include FIFO, weighted average cost

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    © All Rights Reserved
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    AS 2 (Objective Questions)

    Uploaded by

    Nikhil Karkhanis
    2K views3 pages
    This document summarizes key aspects of Accounting Standard 2 (AS-2) in India as established by the Institute of Chartered Accountants of India (ICAI). It includes 14 multiple choice questions and 8 true/false statements related to the standard's definitions and treatment of inventory. Key points covered include: - AS-2 defines inventory and establishes that it should be valued at the lower of cost or net realizable value - Inventory cost includes all conversion costs required to bring the inventory to its present condition - The costs of inventory items that are not ordinarily interchangeable should be valued using their specific individual costs - Acceptable cost flow methods for valuing inventory include FIFO, weighted average cost

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    Objective questions to test knowledge of students on Accounting Standard 2 issued by ICAI

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    This document summarizes key aspects of Accounting Standard 2 (AS-2) in India as established by the Institute of Chartered Accountants of India (ICAI). It includes 14 multiple choice questions and 8 true/false statements related to the standard's definitions and treatment of inventory. Key points covered include: - AS-2 defines inventory and establishes that it should be valued at the lower of cost or net realizable value - Inventory cost includes all conversion costs required to bring the inventory to its present condition - The costs of inventory items that are not ordinarily interchangeable should be valued using their specific individual costs - Acceptable cost flow methods for valuing inventory include FIFO, weighted average cost

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    2K views3 pages

    AS 2 (Objective Questions)

    Uploaded by

    Nikhil Karkhanis
    This document summarizes key aspects of Accounting Standard 2 (AS-2) in India as established by the Institute of Chartered Accountants of India (ICAI). It includes 14 multiple choice questions and 8 true/false statements related to the standard's definitions and treatment of inventory. Key points covered include: - AS-2 defines inventory and establishes that it should be valued at the lower of cost or net realizable value - Inventory cost includes all conversion costs required to bring the inventory to its present condition - The costs of inventory items that are not ordinarily interchangeable should be valued using their specific individual costs - Acceptable cost flow methods for valuing inventory include FIFO, weighted average cost

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    ACCOUNTING STANDARD – 2

    Q.1 MULTIPLE CHOICE QUESTIONS.


    1. Valuation of inventories is governed by
    A. Companies act
    B. Accounting standard 2 by ICAI
    C. Income tax act
    D. Accounting standard 6 by ICAI
    2. AS-2 by ICAI defines inventory as
    A. Assets held for sale in the ordinary course of business
    B. From the stock ledger itself, after each receipt and issue
    C. By deducting value of sales from value of purchases
    D. On estimate basis.
    3. Under the Periodic Inventory System, closing stock is ascertained
    A. By taking actual physical count of all inventory items on hand on a particular
    date
    B. From stock ledger itself, after each receipt and issue
    C. By deducting value of sales by value of purchases
    D. On estimate basis
    4. According to AS-2 by ICAI, inventory covers
    A. Work in progress arising under construction contract
    B. Investments held as stock in trade
    C. Goods purchased and held for resale
    D. Inventories of live stock
    5. According to AS-2 by the ICAI, inventory covers
    A. Machinery spares which can be used only in connection with an item of fixed
    asset whose use is expected to be irregular
    B. Work in progress in case of service providers
    C. Materials or supplies to be consumed in the production process
    D. Inventories of mineral oil
    6. According to AS-2 by the ICAI, inventories should be valued at
    A. Cost
    B. Realizable value
    C. The lower of cost or net realizable value
    D. Retail price
    7. According to AS-2, cost of inventories should comprise
    A. All cost of purchase
    B. All cost of purchase, costs of conversions and other costs incurred in bringing
    the inventories to their present condition
    C. All costs of purchase and selling expenses
    D. All costs of purchase and freight outward
    8. According to AS-2, cost of inventories should include
    A. Direct labor costs
    B. Interest on loans
    C. Production overheads
    D. Cost of designing products for specific customers
    9. AS-2 states that the costs of inventories of items that are not ordinarily interchangeable
    should be valued at
    A. Average cost
    B. Maximum retail price
    C. Weighted average cost
    D. Their specific individual costs
    10. AS-2 states that, goods and services produced and segrated for specific projects
    should be valued at
    A. Net realisable value
    B. Their specifically identified individual costs
    C, contract price
    D. Replacement cost
    11. AS-2 states that, the costs of inventories should be assigned by using preferably
    A. FIFO or weighted average cost formula
    B. Retail price or standard cost
    C. LIFO or simple average cost formula
    D. Adjusted selling price or current replacement cost
    12. Weighted average cost method can be used under
    A. Only the periodic systems of inventory
    B. Both the systems of inventory – periodic and perpetual
    C. Only the perpetual systems of inventory
    D. Neither the periodic nor the perpetual system of inventory
    13. Inventories are assets
    A. Used in the production or supply of goods and services for administration
    purposes
    B. Held for sale in the ordinary course of business
    C. Held for long-term capital appreciation
    D. In process of production and sales
    E. In the form of materials to be consumed in the production process
    F. Choices b and d
    G. Choices b, d and e
    14. AS-2 inventories applies to
    A. Work in progress arising under construction contracts
    B. Work in progress of service provider
    C. Biological assets related to agricultural activity and agricultural produce
    D. None of above
    15. Which of the following is not part of inventory?
    A. Finished goods
    B. Raw materials
    D. Work in progress
    C. Spare parts of machinery
    Q.2 State whether TRUE or FALSE
    1. AS-2 states that inventories cover investments held as stock in trade e.g. Shares,
    debentures etc. Held by a finance company.

    2. AS-2 does not apply to consumables awaiting use in the production process.

    3. AS-2 is applicable to mineral oil.

    4. AS-2 specifically lays down the rule that inventories should be valued at cost or
    net realizable value, whichever is higher.

    5. Raw materials, stores, spares etc. Are not valued at NRV, even if it is lower than
    cost, it the finished goods in which they will be used are expected to be sold at
    or above cost.

    6. Costs due to abnormal wastage of material should not be included in the cost of
    inventories.

    7. AS-2 states that, the costs of inventories or inter-changeable items should be


    valued at their specifically identified individual costs.

    8. The stocks are valued, under the FIFO method, at the rate of the latest Net
    realizable value.

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