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MCQ Self Challenge # 0095 on ICDS –II Valuation of Inventories

ICDS –II Valuation of Inventories

 

Dear Professional Seniors & Friends,
Warm Greeting!

Here is the Next post of #MCQ on concept based practical professional knowledge on Valuation of Inventory -II in a unique manner to be self answered by participants. The detailed answer of these MCQs shall be posted next day for the self assessment of the participants.

MCQ 95.1: M/s ABC India IS a partnership firm trading in goods has turnover Rs 1500 Crores and is dissolved on 15th January ,2016 because of death of a partner. For calculation of Tax under Income Tax Act for the previous year 2015-16, closing stock of Inventory Needs to be valued at
A. Cost
B. Net Realizable Value
C. A or B whichever is lower
D. None of the Above.

MCQ 95.2: If in the above case the firm was dissolved on 15th April 2017,what would be value of closing stock as per Income Tax Act.

A. Cost
B. Net Realizable Value
C. A or B whichever is lower
D. None of the Above.

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CA Sanjay Kumar Agrawal
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Answer MCQ Self Challenge #0095

 

Dear Professional Seniors & Friends,

Warm Greetings!

 

This post of MCQ is on provisions relating to ICDS –II Valuation of Inventory

 

Answer MCQ 95.1: C. A or B whichever is lower

 

Answer MCQ 95.2: B. Net Realizable Value

 

Practical Analysis for MCQ 95.1:

  • As per section 145A of the Income Tax Act (w.e.f 1st April 1999), method of Valuation of purchase and sale of goods and Inventory for the purpose of determining Income from Business and Profession shall be according to the method regularly followed by the assessee.
  • As firm follow generally Accepted Accounting Policies Inventory is Valued at Cost or Net realisable Value whichever is lower. Therefore for tax Purposes inventory will be valued at cost or net realizable value on dissolution of the firm.

 

Practical Analysis for MCQ 95.2:

  • Section 145(A) of the income tax Act has been amended to w.e.f 1st April2017, to  be in line with Income Computation and Disclosure Standards notified under 145(2) with effect from 1st April 2017.

As per ICDS-II

  • Inventories shall be valued at cost, or net realizable value, whichever is lower.
  • In case of dissolution, whether business is continued or not, the cost of inventories shall be valued at the net realizable value

 

On the Basis of above analysis Answer to MCQ 95.1: C. A or B whichever is lower and Answer to MCQ 95.2: B.  Net Realizable Value

 

(Disclaimer: The objective of the MCQ post is just to discuss the concept, it may happen, by change of facts, the answer may be different. Please do not treat this as professional opinion; you can definitely have your own opinion.)

 

Sincere Regards!

 

CA Sanjay Kumar Agrawal

Mobile: 9810116321

 

To access MCQ posts regularly, please Join Telegram Channel:
https://t.me/caSanjayKumarAgrawal

 

For All MCQ post please click on:

Webpage: http://www.casanjay.me/

Facebook: https://www.facebook.com/CA.Sanjay.K.Agrawal/

Linkedin: https://www.linkedin.com/in/ca-sanjay-kumar-agrawal/

 

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