PDF · Notes
AS 2 Inventories: Summary Chart of Cost Formulas and Valuation for CA Inter
- Shared by
- Akshay K.
- Course
- CA Inter
- Subject
- Advanced Accounting
- Added
- 27 Oct 2026
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This one-page summary covers AS 2 Valuation of Inventories, a key topic in CA Inter Advanced Accounting. It sets out the cost formulas allowed for inventory, the rule that inventory is valued at the lower of cost or net realisable value, and what costs are included or excluded. It also covers joint products and by-products, and the cases where AS 2 does not apply. It suits students who want a quick recap of the standard before exams.
What the chart covers
The chart lists the inventory categories: goods held for sale, work in progress, materials for production, consumables and packing material. It then compares the cost formulas, grouping FIFO, weighted average and specific identification, and noting which methods are not permitted for interchangeable items. The valuation section explains how cost and net realisable value are calculated for raw material, work in progress and finished goods, including the treatment of normal and abnormal losses and fixed overhead absorption.
Using it for exam revision
Because the page is a single condensed chart, it works well as a last-minute recap. Read the cost inclusion and exclusion lists alongside the NRV rules, since these are the points most often tested in practical questions. The joint product and by-product section is useful for allocating split-off point costs and reducing the by-product NRV from the main product cost. Pair it with a few practice questions on inventory valuation to test recall.
Who should read it
This note suits CA Inter students preparing Advanced Accounting, especially for questions on inventory valuation and the Accounting Standards. It is also helpful for students who need a concise view of AS 2 before moving on to related standards such as AS 10 on property, plant and equipment.
Key topics in these notes
- AS 2 inventory cost formulas
- Net realisable value of inventory
- Lower of cost or NRV
- Cost inclusions and exclusions
- Joint products and by-products
- Normal and abnormal losses
- Non-applicability of AS 2
Related notes
Frequently asked questions
Which cost formulas are allowed under AS 2?
The chart lists FIFO and weighted average as the main cost formulas, with specific identification used for items that are not ordinarily interchangeable.
How is inventory valued under AS 2?
Inventory is valued at the lower of cost or net realisable value. The chart explains how cost and NRV are computed for raw material, work in progress and finished goods.
Which costs are excluded from inventory cost?
The chart lists general administration costs, selling and distribution costs, abnormal losses and, in most cases, storage costs as excluded from inventory cost.
How are by-products valued under AS 2?
By-products are valued at net realisable value, and that amount is deducted from the cost of the main product to arrive at its net cost.
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