Regarding Valuation of Closing Stock of Raw Materials

by Srinivas.Thatikonda
(Hyderabad)

India!

India!

Q: I want to know whether storage costs (rent for storage of materials until it is used in production) will be considered for valuation of closing stock of raw materials or not.


A:
Very good question Srinivas.

Rent for materials would be considered a manufacturing overhead cost. It would not form part of the value of the closing stock of raw materials. It would, however, form part of the finished goods that are produced at the manufacturing plant.

Please see the lesson on the manufacturing cost statement for more information on overheads and other manufacturing costs.

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Valuation of Raw Materials Closing Stock
by: H.B.Kushwaha

We have purchased Raw Materials along with GST and we take input tax credit of GST because we sell the good taxable so we take the GST benefit of purchase Material. Tell me GST amount has been taken in closing value or not.

A:
As far as I know you create separate "GST Input" and "GST Output" accounts for GST, which is a sales tax similar to VAT.

"GST Input" is what you collect on purchases, it is a debit account (a basically its what we can claim from the government tax authority).

"GST Output" is what you record when you make sales, it is a credit account (basically what we owe the government tax authority).

In the end of the day the amount you owe to the tax authorities is GST Output - GST Input.

Because we record separate accounts for GST Input and GST Output, it will not be part of the Inventory account and will not be part of the value of closing stock.

- Michael Celender

Purchase Tax included or not?
by: Anonymous

Should the tax paid for purchase of the materials be included for valuation of raw materials????

Editor: No. Tax is never part of the value of any asset or expense item. So exclude tax.

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