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Lkas 2 questions and answers 2025

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Sri Lanka Accounting Standard LKAS 2 outlines the accounting treatment for inventories, focusing on the recognition of costs as assets until related revenues are recognized. It provides guidance on measuring inventory costs, including purchase and conversion costs, and establishes criteria for recognizing expenses and determining net realizable value. The standard applies to all inventories except certain financial instruments and biological assets, and it details cost formulas such as FIFO and weighted average cost. Effective from January 1, 2013, LKAS 2 aims to ensure that inventories are not carried at amounts exceeding their expected realizable value.

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How does an increase in inventory affect the financial statements?

Reporting of Inventory on Financial Statements An increase in inventory will be subtracted from a company's purchases of goods, while a decrease in inventory will be added to a company's purchase of goods to arrive at the cost of goods sold.

What would cause inventory to increase?

Your inventory value can also increase if the supply of your product in the market decreases while demand remains relatively steady. Commodities are one example; if you have a warehouse full of coffee and weather ruins the coffee crop, the value of your inventory will increase with the market price.

What is the proper valuation of inventories under PAS 2?

Inventories should be measured at the lower of cost, and net realizable value[1] (NRV). 2.

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Lkas 2 questions and answers pdf free download Measurement of inventories LKAS 2

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What is Lkas in accounting?

15 of 1995, which comprise Accounting Standards prefixed both SLFRS and LKAS (SLFRS refers to Sri Lanka Accounting Standards corresponding to IFRS (International Financial Reporting Standards) and LKAS refers to Sri Lanka Accounting Standards corresponding to IAS (International Accounting Standards):

Which of the following represent the cost measurement methods that are permissible under IAS 2?

For items that are interchangeable, IAS 2 allows the FIFO or weighted average cost formulas.

What is the Lkas 2?

Cost of agricultural produce harvested from biological assets. 20 In accordance with LKAS 41 Agriculture inventories comprising agricultural produce that an entity has harvested from its biological assets are measured on initial recognition at their fair value less costs to sell at the point of harvest.

How is inventory valued as per AS 2?

Following are the steps for valuation of inventories: A. Determine the cost of inventories B. Determine the net realizable value of inventories C. On Comparison between the cost and net realizable value, the lower of the two is considered as the value of inventory.

What is the proper valuation of inventories?

Inventory valuation is the monetary amount associated with the goods in the inventory at the end of an accounting period. The valuation is based on the costs incurred to acquire the inventory and get it ready for sale.

Lkas 2 questions and answers 2025

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What is Lkas in accounting?

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