Inventory Accounting

Financial Accounting Project

Term I

 The CNX Nifty is a well

diversified 50 stock index
It accounts for 23 sectors of the
economy
It is used for a variety of
purposes such as benchmarking
fund portfolios,Total
index based
derivatives and index funds
8
7
6
5
4
3
2
1
0

Total

Bajaj
Auto
Ltd.
Tata
Motor
s Ltd.

Bosch
Ltd.

Automobile
Maruti
Suzuki
India
Ltd.

Hero
MotoCo
rp Ltd.
Mahindr
a&
Mahindr
a Ltd.

Tata
Powe
r Co.
Ltd.
Relianc
e
Industr
ies Ltd.
Power
Grid
Corpora
tion of
India
Ltd.

Bharat
Petroleu
m
Corporati
on Ltd.

Cairn
India
Ltd.

GAIL
(Indi
a)
Ltd.

Energy

Oil &
Natural
Gas
Corpora
tion Ltd.

NTPC
Ltd.

Axis
Bank
Ltd.
Yes
Bank
Ltd.

Bank of
Baroda

State
Bank of
India

HDFC
Bank
Ltd.

Financial
Services
Housing
Developmen
t Finance
Corporation
Ltd.

Punjab
National
Bank

Kotak
Mahindra
Bank Ltd.

ICICI
Bank
Ltd.
IndusInd
Bank Ltd.

IT
Bhart
i
Airtel
Ltd.
Idea
Cellul
ar
Ltd.

Tata
Tech
HCL
Infos Consulta
Mahin
Technolog
ys
ncy
dra
ies Ltd.
Ltd. Services
Ltd.
Ltd.

Wipr
o
Ltd.

METALS

Telecom
Coal
India
Ltd.

Hindalc
o
Industri
es Ltd.

NMDC
Ltd.

Tata
Steel
Ltd.

Vedanta
Ltd.

Industrial Manufacturing
Bharat Heavy Electricals Ltd.

Media and Entertainment

ZEE Entertainment Enterprises Ltd.

Construction
Larsen and Toubro Ltd.

Ambuja
Cements Ltd.

ACC Ltd.

Cement and
Cement
Products

UltraTech
Cement Ltd.

Grasim
Industries
Ltd.

Asian
Paints
Ltd.

Consume
r Goods

Cipla
Ltd.
Sun
Pharmaceu
tical
Industries
Ltd.

Phar
ma
Lupin
Ltd.

Hindus
tan
Unileve
r Ltd.

Dr.
Reddy's
Laborato
ries Ltd.

ITC
Ltd.

What is Inventory?
1) stock, goods, merchandise.
2) those assets, those products, those things of value,
3)that you either buy from another or make yourself
4)that you then sell on to someone else
5)(at a higher price than what it cost you to buy or
make the inventory).

What inventory means for different

industries?

Manufacturing- make and sell

Raw materials
Work in process
Finished goods
Goods for resale
Stocks in transit.
Consignment stocks.
Maintenance supply.

What inventory means for different industries?

Trading - purchase and sell
Finished goods
Goods for resale
Stocks in transit.
Consignment stocks.
Maintenance supply.

Services - sell Intangibles

Stock in trade

Bosch Ltd.

Bajaj Auto Ltd.

Raw materials
consumables
Work in process
Finished goods
merchandise
Stock-in-trade,
Stores and spares,
Loose tools

Raw material,
Work in progress,
Finished Goods,
Stores,
Spares and Packing
material, Loose Tools

Tata Motors Ltd.

Stores and spare parts
Consumable tools
Raw materials and
components
Work-in-progress
Finished goods
Stock-in-trade (in
respect of goods
acquired for trading)
Goods-in-transit
i. Raw materials and
components
ii. Stock-in-trade

Mahindra & Mahindra

Ltd.
Raw materials,
Work-in-progress,
finished goods,
Supplies

Hero MotoCorp Ltd.

Raw materials and
components,
stores and spares,
loose tools,
finished goods
work in progress

Maruti Suzuki India

Ltd.
Components and Raw
Materials
-In transit
-with vendor
-at factory,
STORES and SPARESvehicles
machinery,consumables

Axis Bank Ltd.

NA

Bank of Baroda

NA

HDFC Bank Ltd.

NA

Housing Development Finance Corporation NA

Ltd.
ICICI Bank Ltd.

NA

IndusInd Bank Ltd.

NA

Kotak Mahindra Bank Ltd.

Stock in trade

Punjab National Bank

Stock In trade for PNB GIlts ( Subsidary

unit )

State Bank of India

NA

Yes Bank Ltd.

NA

Cairn India Ltd.

GAIL (India) Ltd.

Finished goods (crude

oil), Stores and Spares

Finished Goods,
Work In Progress
Stock In Trade.

NTPC Ltd.

Bharat Petroleum
Corporation Ltd.

Oil & Natural Gas

Corporation Ltd.

Raw materials(Coal,
Naphtha, Chemicals and
Consumables, Fuel oil),
Stores and spares,
Loose tools,
Steel scrap,
Goods in transit,
Others(Steel, cement ,
ash bricks)

1.
2.
3.
4.
5.
6.

Raw Materials
Work-in Progress
Contract WIP / Site
under development
Finished Goods
Stores and Spares
Investment as
Stock_in_Trade
Stock on hire
Packing Materials
Goods-in transit
Other Inventory

Raw materials
Stock -in-trade
Finished goods
Stock in process
Stores and spares
Packaging material

Reliance Industries
Ltd.
Cost of raw materials,
process chemicals,
stores and spares,
packing materials,
trading and other
products

Power Grid Corporation of India

Ltd.
Components,
spares and other spare parts (transmission line items such as
tower parts, conductors, insulators
and other items, substation items
such as transformers, circuit
breakers, ICTs and other items, high
voltage direct current
equipments/spares, unified load
despatch centre spares, telecom
spares and other stores)
loose tools
consumable stores
Other Line Materials in transit

Tata Power Co. Ltd.

Raw materials,
Work-in-progress,
Finished goods,
Stock-in-trade-shares
Fuel-stores,
Fuel-in-transit,
Stores-in-transit,
Stores and spare parts,
Loose tools
Property under development (others).

ACC Ltd.
Raw Material
Work-n-Progress
Finished Goods
Stock-in-trade
Stores & Spare Parts
Packing Material
Fuels

Ambuja Cements Ltd.

Raw Material (Fly ash, Gypsum,
Limestone, coal, fuel, Clinker,
polypropylene (PP) granules)
Work-in-progress
Finished goods (Cement)
Stock-in-trade
Stores and spares
Coal and fuel
Packing materials

Grasim Industries Ltd.

Raw Material,
Work in progress,
Finished Goods,
Stores and Spare parts,
Fuel in transit,
By products,
Waste/Scrap, Others

UltraTech Cement Ltd.

Work-in- progress (WIP),
Finished goods,
Stock-in-trade and trial run
inventories,
Waste / Scrap,
Raw material,
Fuel,
stores & spare parts
packing materials

Wipro Ltd.

Infosys Ltd.

Raw material(including
goods in transit),
Work in Progress,
Finished goods(including
goods in transit)
Traded goods,
Stores and spares

Finished products:
Software development
charges

HCL Technologies Ltd. Tech Mahindra Ltd.

Stock in trade,
Stores and spares.
Finished goods
Goods in transit

Components and Parts,

Finished Goods,
Work in progress
Projects in progress

Software products

Tata Consultancy
Services Ltd.
Raw materials,
Sub-assemblies
Components,
Goods-in-transit,
Finished goods
Work-in-progress
Stores and spares

Hindalco Industries
Ltd.

NMDC Ltd.

Raw materials,
Finished goods,
Work In Progress,
work-in-progress,
Finished Goods (Iron
stock-in-trade,
Ore, Diamonds, Sponge
Raw materials,
Iron,Wind Power),
Spare parts and supplies Supplies (Stock-in
Trade).

Tata Steel Ltd.

Vedanta Ltd.

Saleable Steel(Finished), Work-in-progress

Agrico Products,
Welded Steel Tubes,
Raw Materials,
Semi Finished Steel and
Scrap, Bearings,
By Products

Coal India Ltd.

Work-in-progress,
Finished Goods

Cipla Ltd.

Dr. Reddy's Laboratories Ltd.

Raw material,
Packaging material ,
Work In Progress,
Finished Goods,
Stock in trade,
stores,spares,consumables

Raw Materials,
Work-in Progress,
Contract WIP / Site under
development, Finished Goods,
Stores and Spares,
Investment as Stock_in_Trade,
Stock on hire,
Packing Materials,
Goods-in transit

Lupin Ltd.

Sun Pharmaceutical Industries

Ltd.

Raw Materials,
Packing Materials,
Work-in-Process,
Finished Goods,
Stock-in-Trade,
Consumable Stores and Spares,
Goods-in-Transit (Raw Materials
,Packing Materials, Stock-in-Trade,
Consumable Stores and Spares)

Stores & Spares,

Raw Materials,
Packaging Materials,
Finished Goods,
Work in Progress,
Distribution Inventory

Telecommunication Services
Bharti Airtel
Ltd.

Finished goods (Handsets, modems, sim cards, TDMA,

Broadband interactive terminal/ gateway), Supplies
(2g,3g,4g technologies, Digital TV,IPTV)

Idea Cellular
Ltd.

SIM and Recharge vouchers

Industrial Manufacturing
BHEL

Raw materials, Components , Loose tools, Stores, spares,

Work in progress, finished goods.
Consumer Goods

Asian Paints Ltd. Raw materials, work-in-progress, finished goods,

Supplies (packing materials, stores, spares, components,
consumables and stock-in-trade)
Hindustan
Unilever Ltd.

Raw materials ,Packing materials,Work-inprogress,Finished goods,Stores and spares, Stock-intrade

I T C Ltd.

Raw materials(Including package materials) , Work in

Progress , Finished goods(manufactured) , Stock in trade

Media and Entertainment

Zee Entertainment
Enterprises Ltd.

Raw stock- tapes,

Media content - Film rights, music rights
Under production - programs

Infrastructure
Larson and Toubro
Ltd

Raw materials, components,

construction material,
manufacturing work in progress, finished goods,
stock in trade,
stores and spares,
loose tools,
property development related to work in progress.

Difference in the types of

inventories between the companies,
if any (CERs, ---)

Bajaj Auto Ltd.

Tata Motors Ltd.

Manufactured Goods, Traded Goods

Manufactured Goods Traded Goods

Kotak Mahindra Bank Ltd.

Stock in trade

Punjab National Bank

Stock In Trade

GAIL (India) Ltd.

LNG and Natural
Oil & Natural Gas
oil,Natural gas )
Corporation Ltd.

Renewable Energy Certificates (RECs),Stock of

Gas in pipelines
Finished goods (other than Sulphur,Crude

Tata Power Co. Ltd.

Marketing securities inventories

ACC Ltd.

Stock in Trade

Hindalco Industries Ltd.

Coal India Ltd.

HUL
Bharti Airtel Ltd.

Goods for resale

Inventory of Stock in trade. Inventory of Coal.

Inventory of workshop.
Inventory of closing Stock of Press.
Stock in market
Stock in market

At what intervals they do the

physical verification of inventories?
Bosch
December (Annually)
ITC
Once A Year
Dr. Reddy
Once A Year
Bajaj Auto
Quarterly
M&M
Once A Year
BHEL
At Year End
BPCL
At Year End
Yes Bank
At Year End
ICICI
Monthly
PNB
Periodic
Vedanta Limited
Monthly
Tata Motors
Year End
All other companies do at reasonable intervals

Q. 4 Which method to determine the cost of

inventories to be expensed in a year (cost flow
assumption)?
There are basically 3 methods of cost
flow assumptions:
First In, First Out (FIFO)
Last In, First Out (LIFO)
Weighted Average

These methods are combined with 2

methods of cost of inventories
Perpetual
Periodic

FIFO
LIFO
8

Weighted
Average

NA
13

Actual Cost
33
9

NRV
Specific
Identification
Method

35
30
25
20
15
10
5
0

Q.5 Valuation of inventories in balance sheet

(inventory valuation policy)?
There are basically two methods of valuation which are
predominant in the valuation of inventories in the balance
sheet.
1. At Cost: The actual cost at which the inventory is being
purchased.
2. At NRV: The value of an asset that can be realized by a
company upon the sale of the asset, less a reasonable
prediction of the costs associated with either the
eventual sale.
. The lower value of the two is used for entry in the
balance sheet.

Q.6 Changes in inventory costing (cost flow

assumption) and inventory valuation policy, if any,
and the reasons for the same.
There haven't been any significant changes
in the methods of inventory costing in the
past 5 years for all the companies.
New inventories have been assigned a
particular mode of inventory costing and the
same is applied to it every year.
These policies are adapted for ease of
calculation of income and profitability.

Thank you