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Editorial Board on Accounts and Audit
  • Bought items

    by Sharad on Saturday, April 22, 2017 at 06:29 PM

    can bought out items be treated as stock-in trade? As the Bought out items are simply procured and sent to customer site with out claiming any CENVAT. should the purchase of such items shown separately as Purchases as stock in trade or it can be the part of the total purchases.Pl advise.

    Replied byEditorial Board Tuesday, April 25, 2017 at 03:58 PM

    The accounting treatment shall depend upon on other factors such as:-

    A) Risk and rewards shall belong to whom – If the entity is bearing risks and rewards then such purchases must enter in the books of accounts

    B) Whose name is mentioned in the invoice – If the entity procures the items in its own name and then bill the customer subsequently (by adding mark-up) then such purchases must enter entity’s books of accounts.

    C) Whether the entity is merely acting as an agent for procurement on behalf of client and charging margin – In such cases the purchases and sales may be disclosed separately in notes to accounts and only the consultancy fees and related expenses should enter the statement of profit and loss.

    You may also refer certain opinions available on the website. Navigate to All about AS > AS 9 > ICAI Opinions

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