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AS 1 Disclosure of Accounting Policies and AS 2 Valuation of Inventory: CA Inter Advanced Accounting Notes
- Shared by
- Deepak D.
- Course
- CA Inter
- Subject
- Advanced Accounting
- Added
- 5 Nov 2026
Part of: CA InterAdv Accounting
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These are summary notes on two accounting standards in the CA Inter Advanced Accounting syllabus. The first part covers AS 1, which explains what accounting policies are, where different policies can be adopted, the factors of materiality, prudence and substance over form, how policies are disclosed, and when a change is allowed. The second part starts AS 2 on valuation of inventory, covering the meaning of inventory and how the cost of inventory is calculated. The notes suit students revising accounting standards for CA Inter who want a quick, structured recap before attempting questions.
What the notes cover
The AS 1 pages explain the meaning of accounting policies with examples such as FIFO and weighted average cost formulas, and list areas where policies can differ, including inventory valuation, government grants and cash flow statement methods. They also cover the fundamental accounting assumptions of consistency, accrual and going concern. The AS 2 pages define inventory as finished goods, work in progress and raw material, and set out a step-by-step table for total purchase cost and total production cost.
How to use them for revision
Read the AS 1 comparison table on materiality, prudence and substance over form, since it is a common source of theory questions. For AS 2, practise the cost of inventory steps by listing which items, such as trade discounts and non-refundable duties, are added or deducted. Use the flowchart on disclosure of changes in policy to answer short descriptive questions in a clear order.
Who should read them
These notes are useful for CA Inter students preparing Advanced Accounting, particularly for the accounting standards portion of the paper. Students who are short on time and want a concise recap of AS 1 and the start of AS 2 will find the layout easy to scan.
Key topics in these notes
- Meaning of accounting policies
- Areas where different accounting policies can be adopted
- Materiality prudence and substance over form
- Disclosure and change in accounting policies
- Fundamental accounting assumptions
- Meaning of inventory
- Cost of inventory and total purchase cost
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Frequently asked questions
What is covered in AS 1 Disclosure of Accounting Policies?
The notes cover the meaning of accounting policies, areas where different policies can be adopted, factors such as materiality and prudence, disclosure requirements and conditions for changing a policy. They also cover the fundamental accounting assumptions.
How is the cost of inventory calculated under AS 2?
The notes show that total purchase cost for raw material and stock in trade includes purchase price, less trade discount, plus non-refundable duties and taxes, plus delivery, handling and other necessary costs. Production cost for finished goods and work in progress is built up from material consumed and direct labour.
What is the difference between inventory and PPE according to these notes?
The notes say spare parts, stand-by equipment and servicing equipment are treated as inventory if they do not meet the definition of property, plant and equipment.
Can I read the full notes for free?
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