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Editorial Board on Accounts and Audit
  • Accounting issue & AS-2

    by Vivek on Saturday, July 13, 2019 at 03:59 PM

    Dear Sir, A Factory is situated in outskirts of a city. The Sales Depot of the factory from where sale of goods is made is situated in the city. Query- How accounting should be done of goods sold to Sale depot by factory ?? 2) If Freight is not charged in the invoice by seller. Instead The Transporter issues Bill of Freight SEPARATELY to the Buyer. Query- Whether such SEPARATE ISSUE OF BILL OF FREIGHT by Transporter WILL FORM PART OF COST WHILE DOING VALUATION OF CLOSING STOCK ??

    Replied byEditorial Board Monday, July 15, 2019 at 08:07 PM

    Dear Vivek,

    There are certain anomalies in the query. It is presumed that the principal query is
    1. How to account for transfer of goods from factory to sales depot ?
    2. Whether freight costs incurred from factory to sales depot shall be included in the cost of inventory ?

    1. Movement of goods from factory to sales depot is an internal transfer and hence this cannot be considered as sale. It is presumed here that sales depot belongs to the company.

    2. Freight incurred from factory to sales depot shall form part of inventory costing presuming goods can be sold only from sales depot and not from factory. There are various EAC opinions on this and you can refer the opinion under the navigation menu
    Accounting>>AS>>AS 2>>ICAI Opinions

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