Indian accounting standards-valuation of inventories and revenue recognition

Abstract

Recognizing the need to harmonize the diverse accounting practices prevalent in India and to integrate them with the global practices, the Accounting Standards Board (ASB) was constituted in April I977. The accounting standards (AS) are issued under the authority of the council of the Institute of Chartered Accountants of India (ICAI). The ICAI has issued I5 accounting standards up till now. But, we have selected AS-2: valuation of inventories and AS-9: revenue recognition for the study. AS-2 deals with the principles of valuing inventories for financial statements. The value attached to inventories materially affects the operating results and the financial position. AS-9 deals with the bases for recognition of revenue in the income statement of an enterprise. In order to prepare a meaningful income statement for an accounting period, the most crucial requirement is the proper determination of the revenue for the period to find the true and fair profit.