What were those 5 things?
Sir, you made us start with a small equation and we thought
you will talk about small things but you took the matter to
far by cheating
Cost plus profit is equal to sales
Then I told you to calculate the percentage of profit in
this, on the basis of cost and on the basis of sales how
can we calculate? 2nd thing was that cost is actually COGS
Cost of Goods Sold 3rd equation was
COGS is equal to sales minus profit in which we did COGS in
detail with the help of some examples 4th thing was
Inventory is valued at cost or NRV whichever is lower and
5th thing I told you that there is a direct relation
between stock and profit
Sir, why are you telling this repeatedly?
We are going to need all these things today
That's why I am telling you and listen to the topics
So, the 5 things I have taught you on the basis of these,
what do you know till now?
You still know that
Inventory is also called stock and it means that the goods
that we have kept to sell in our godown we bought the
goods, it is not sold yet it is kept in stock you know that
it means stock but it is not only this what does stock mean?
Stock means in detail
Today you will get to see meaning of inventories
Yesterday it was just a glimpse
Today you will get to see meaning of inventories from A to Z
After that what do you know till now?
Till now you think that we do inventory valuation because
it has to be written in trading account by closing stock
and it has to be written in balance sheet in current assets
in the name of stock but today you will get to know that
these are not the only two reasons to calculate the value
of inventory
Calculating the value of inventory becomes very important
due to other reasons and I will teach you that in topic
number 2 why valuation of inventories is important
What do you know about the base of yesterday's class?
You only know that inventory is valued at cost or NRV
whichever is lower you only know the base but to calculate
the value of inventory we have many more things which along
with cost or NRV whichever is lower we have to study more
we will study that in topic number 3 how to find the value
of inventories so if you are able to feel that you are able
to find the value of inventories then I will teach you the
same topics of last class in further detail ok we made the
base there now we will convert
foundation into buildings and floors and these two topics
will come later after a long time periodic and perpetual
inventory system and inventory staking which is a practical
topic these will come later ok, till where will we do today
sir? today we will try we will try for 2nd and 3rd let's
start this is the green signal now we will start before
moving ahead calm your mind because there is no meaning in
life life is unfair almost meaningless although
demotivating but it is true so what is the
here? enjoy every moment of life don't study with a burden
study with heart understand things this is not a burden to
pass the exam this is not a burden at all if you study with
this burden then you will be in trouble no pressure at all
let's go
meaning of inventories meaning of inventories meaning of
inventories our first topic is meaning of inventories what
is the meaning of inventory? let's see in detail what you
know is a very small thing that the remaining stuff which
is not sold let's see in detail to know the meaning of
inventory we should know first that what are the types of
business
I will take you to the bottom we will touch the seabed then
we will come up then we will swim on the water type of
business see there are three types of business t for type t
for three number one manufacturing business sir are you
talking about India or the whole world there are only three
types of business in the whole world manufacturing trading
and service business manufacturing business means make and
sell make the stuff and sell the stuff trading means made
the stuff not by yourself bought
someone then sold the shopkeepers who are around your house
what they do buy from wholesale and sell you they come in
the trading category and the stuff from where your
neighbors shopkeepers buy the people who make the stuff the
companies that manufacture them they are called
manufacturing business and who comes in the service as soon
as the name of the service comes our classes come in the
service sir where nothing is being sold where service is
being given knowledge is being shared let me
you one more example here let's take the example of the bus
have you ever sat in the bus sir what are you talking about
we have never sat in the bus so see here
I have also put a photo of the bus bus is a business it
comes in the service business what happens you get on the
bus you give the ticket money and in return you are dropped
from one place to another is the bus driver or conductor
selling you some stuff is there a sale of goods no, just
picked up from one place leave it at another place when you
are dropped at another place the driver does not leave the
bus that the bus is also yours no, it is just a service
where there is no sale of goods
there is no discussion of goods that is your service
business take me, bus, train take their example it is
enough so there are three types of business manufacturing
trading and service manufacturing you can also call love
marriage with love find a girl yourself convince her
yourself talk about marriage make your own stuff find a
retailer sell it yourself fix the pricing trading you can
also call arranged marriage one party picked up from here
one party picked up from here mixed both bought from
sold here that is called trading
I don't have anything like this in service
I don't have anything like this so for now, work in
manufacturing and trading ok sir manufacturing, trading and
service so what you say that stock means unsold items or
unsold goods left in godown in godown, the goods that are
unsold that is called stock this applies only for trading
business this applies only for trading business all the
examples we gave you yesterday all of them were trading
business examples try to remember the one I was talking
about he used to buy a t-shirt and used to
it yes sir he bought a t-shirt and sold it these were
trading business examples in trading business, only stock
means that the goods you bought and unsold are still in
your godown my dear friends as soon as manufacturing comes
sir, why didn't you tell me this yesterday we will go
slowly yesterday it was in the veil, today the veil is open
we have to go slowly when the time is right we should talk
about it whether it is about accounts concept or life ok as
soon as we come to manufacturing the
of stock the circle widens my dear friends only the goods
that we have kept to sell only that is not called stock the
definition widens I will tell you
I will give you an example
I will talk to you through the example
I will take my discussion forward listen carefully these
photos which I have put There is a logic behind it.
You must have registers in your hand.
Let me show you. I also have registers.
It's not a register, it's a paper.
As soon as we have papers, not papers, it's a register.
Yes. How does a paper get made?
You don't think of anything.
You take Rs.50-100 and go to a retailer and ask him to give
you a particular register.
Give him a spiral one, give him a plain one.
You pick it up and bring it home.
Have you ever thought of how it's made? How the paper is
formed?
How the paper is manufactured?
Let me tell you.
If you haven't heard it, let me tell you. It's not a big
deal.
Sir, we know that it's made of wood.
Yes, that's all you know. I'll tell you the rest of the
process. Listen carefully.
First of all, wood is cut.
Sir, wood is cut, trees are cut.
Oxygen is also a big problem.
Look at how hot it is today, April 25th.
Yes, it's very hot.
It's all because of cutting trees.
That's why what you and I are doing, online education, it's
a very good thing for the environment.
At least we're not cutting wood from here.
We're doing paperless work.
Although we can do better, that's enough for now.
First of all, we have to cut the wood.
After cutting the wood, the tree is cut, the wood is cut
and ready.
After cutting the wood, the wood is peeled off from the top.
Because they have a bad portion on top in which there is
water, rain or sun. It doesn't work for paper.
It is peeled off from the top and made completely plain.
There is a picture on the side.
We have prepared the wood by peeling it off.
What happens after this?
After this, the wood is cut into small pieces through a
machine.
Many pieces are cut.
Then those pieces are mixed with chlorine.
You must have heard of chlorine.
Chlorine is mixed with chemicals and boiled.
You can see white particles in the middle.
Some people call it ice cream.
Ice cream is like this, scattered.
We eat ice cream from the bottom.
It becomes a material like this.
It is called pulp.
This is called pulp, my dear friends.
You can see the white color in the middle.
I'll mark it for you.
It becomes a pulp.
Then this pulp is further processed.
It is dried.
It is processed through machines.
At last, we get big paper rolls like this.
This is how paper is manufactured.
We are not talking about the register.
First make the paper.
Then you can make the register.
This is how paper rolls are made.
China is number one in paper producing.
USA is second.
Japan is also in the top 10 list.
Italy is 10th.
Where is India?
India is not in the top 10 in this list.
I don't know where India is.
India is not in the top 10 in paper producing.
You should also import something.
If you make everything here, how will it work?
Other countries should also have some work.
I told you this example because the whole outline is ready
for you.
Now listen to me.
Now comes the crux line.
As far as you know so far, based on the example of
yesterday's T-shirt,
the meaning of stock for you is whatever is left is ready
to be sold.
That is called stock.
If we apply the same thing in the example of this paper
company, then the big paper rolls will be called stock.
Because this is what we are ready to sell.
The paper is ready.
Not all the work is done by one company.
It is a big deal for one company to make paper from wood.
Then the wholesale papers are sold to another company.
Then the second company takes the big paper rolls and makes
a register. That's why it is limited to one company.
So these big paper rolls
are ready to be sold.
What will happen to the pulp and wood? It is not necessary
that all the wood will be used up.
It is not necessary that all the pulp will be used up.
At every moment, some wood and pulp are left.
I also have this type of stationery.
It never ends.
So if we include this in the inventory of wood and pulp,
then our inventory will expand and you will be able to
understand the definition of inventory in the manufacturing
business.
Inventories are assets held.
These assets are held in business.
These assets are held in business for sale in ordinary
course of business. What is kept here to sell?
Big paper rolls.
We know this.
We have been understanding this since yesterday.
In the process of production
of pulp, the pulp is also called inventory.
In the case of manufacturing business, the pulp is also
called stock.
For consumption, if there is something that is consumed
completely, that is wood,
then it will come in the definition of inventory.
Wood, pulp, final product, big paper roll, all the
remaining quantities will come in the definition of
inventory.
This wood is called raw material.
The very starting point
is called raw material.
When the pulp is in the middle, that is called work in
progress.
When big paper rolls come in saleable condition, they are
called finished goods.
In the trading business, there is only one type of goods,
finished goods.
In manufacturing, raw material and work in progress are two
types of inventories.
I hope you have understood.
Sir, do we need to remember this definition?
I don't think the meaning of inventory can be asked in a
theory question.
Just read it once.
I have written a note here.
Inventories include packing material.
The packing boxes in which these big paper rolls will be
sold, will also be a part of your inventory. All the
packing boxes will also be a part of your inventory.
What will be in the inventory?
Raw material, wood, WIP, pulp, finished goods, big rolls of
paper and packing boxes used to pack those final products
of big rolls of paper.
In the trading business, there is only one type of goods,
finished goods.
This chapter does not apply
to my business.
It applies to my students' curriculum.
I should be aware of it.
This is indirectly related to my business.
I have put the logo of my classes here.
If you like it, please comment below.
If you don't like it,
please let me know.
I will try to improve it.
I will try to improve it. tell me what other improvements
can be made in this
we didn't like it after this month make something, we won't
like it then that hate thing will happen okay? okay sir
let's go let's go let's go this is the insta id about which
i was saying you can follow ca underscore sandeep
underscore sharma sir why should we follow? what is the
benefit? tell me one thing look at one place isn't your
class enough?
if you follow me on insta then you will get i have made
small reels there for these types only that i have told you
the meaning of inventory quickly as a revision small small
reels of this type you will get for every topic for
depreciation for NPO for goodwill for all this there are
also gk types questions there gk type questions related to
accounts so you will definitely get benefit from there you
will also get benefit from course i have made small reels
for BRS also that we will plus this in
book we will minus in pass book what will we do? how? if
you follow then you will definitely get benefit okay? and
you have to go and see what money is being spent
whenever you run instagram day and night what happened in
that? okay sir
the discussion of meaning of inventory ends here
now
now now now sir what is the difference between stock and
inventory? you could have told me directly there is no
difference still sir tell me why there are two different
words
there is no difference between stock and inventory still if
you want to know for knowledge purpose then i will tell you
scare your younger brothers and sisters scare your juniors
those who want stock and inventory are same in front of
them you will say no there is a small difference between
stock and inventory our sir told so you will get some
impact what is the difference? inventory is
that is used for manufacturing business stock and in
trading business the word used is stock rest is same what
happens in inventory this raw material and WIP is also
included whereas stock means only stock of finished goods
rest are used interchangeably in market
I will also be using interchangeably in front of you
sometimes so don't take it to heart it is also used in
books there is no criticality here that you have to use it
exactly like that okay? okay and there are such small
points in reels with which I try to increase the GK of
accounts
come on come on sir you will follow today you are saying
again and again if you do then you will know next topic is
coming why valuation of inventories is important sir you
told it has to be written in trading account and has to be
written in balance sheet means third point that has to be
present in balance sheet that's why valuation of inventory
is important otherwise how trading account will be
completed otherwise how balance sheet will be made and if
trading P&L balance sheet is made then
income tax return will be filed department people will come
to office notice will come how work will be done that's why
inventory is important and one more thing we saw yesterday
closing stock and profit has direct relation yesterday you
told in last yes
closing stock and profit has direct relation so even if
closing stock disappears profit will not come trading
account will not be completed so relation between inventory
and income because of that valuation of inventory it is
necessary to find out if you increase or decrease in
inventory then immediately your profit will fluctuate if
there is any mistake in inventory calculation mistake or
writing is wrong then it will directly affect profit direct
relation that's why calculation of inventory
more important determination of income means to find out
profit inventory is necessary if closing stock is not
written trading account will not be completed gross profit
will not be found three points are done two more points
I will teach you this topic point number four statutory
compliance friends tell me who is the highest in this
country sir, country is the highest still I am talking
about highest in the country
I am talking about those who run the country they also run
the country who is the highest among them now some people
will say Modi ji they think prime minister's position is
highest in India they don't even know that president's seat
is the highest the first citizen of India is president of
India not prime minister so sir, president is the highest
president is also not the highest so who is the highest
brother constitution means constitution of the country
constitution of the country the great
who established the constitution
constitution is the highest the responsibility of running
the constitution that is on central government and central
government to run the country has to make many divisions
has to make many ministries which we call ministries which
we call ministries there are many ministries there is home
ministry there is foreign ministry there is defence
ministry among them there is education ministry among them
there is one ministry of corporate affairs ministry of
corporate affairs which is called MCA and
you go to article ship after inter if you get ROC work
ROC work you will be sitting on the other side
MCA.gov.in companies legal compliances which forms are
filled are filled here and if we have to be ready as a
comprehensive package if we need information about ROC if
we need information about income tax we should know TELI
those skills should be built in us with which we get
highest of the packages we get lakhs of packages in the
beginning during joining we don't have to struggle after
becoming CA so you must follow our channel there you will
get many information about skills which courses
there how to do from where what should be the exact timing
you will get all the details through channel so why are you
talking about MCA
Ministry of Corporate Affairs work is all the corporates in
India all the companies
monitoring these companies managing them for them direction
instating rules and regulations
Ministry of Corporate Affairs company can't run by itself
have to make rules and regulations for them do you study by
yourself till I don't ask you for revision parents don't
ask you for revision do you do you don't so rules and
regulations should be there company shouldn't waste
anyone's money shouldn't misuse investor's money should be
under government's supervision should follow all the
compliances for this rules and regulations should be there
to make them
Central Government
Ministry of Corporate Affairs
Ministry of Corporate Affairs has made law on companies
that is called
Companies Act 2013 Companies Act 2013 there is little in
foundation
Companies Act 2013 you must have read it if not then you
are going to read
Companies Act 2013 in this
Companies Act 2013 many sections are there many rules are
there and some schedules are there
Sir, what are these schedules? schedules tell you some
extra things which are not written in section and rules as
an example
Schedule No.
Companies Act 2013 it has told that any company in India
how will it make its balance sheet in which format and its
profit and loss account statement of profit or loss in
which format whole format is there and every company in
India must follow that format if every company follows
different format then it is done then all companies will
show same financial statement you will not be able to audit
you will learn other format in one year and you are allowed
60 audits then how will you take profit
should be same that is why it is said in Schedule No.
3 and in Schedule No.
3 about format about company and SPL format then one thing
is written as notes that in your inventories
raw material, WIP and finished goods how much is there you
have to disclose it separately
if there is no finished goods in any business then write
all amount in finished goods and write zero in raw material
and WIP if it is a case of trading but you have to write if
this is formatting then it will remain if it is a
manufacturing business then there will be figure in raw
material
WIP and finished goods if it is a case of trading then
write the figure in finished goods and write zero in raw
material and WIP but the formatting will remain
so when we evaluate the inventories separately we take out
our raw material, WIP and finished goods so we are doing
statutory compliance statute means law the law of companies
act that you have to give full detail in formatting that
detail is also fulfilled when we take out the value of the
inventory till we do not take out the value of the
inventory if we do not take out finished goods in raw
material and WIP then what will we write in the format of
schedule 3 and if we will not be able to
anything then there will be disobedience of the schedule of
the act that's why with the evaluation of the inventory it
also helps in doing statutory compliance it also helps in
doing statutory compliance
and last is liquidity analysis
liquidity analysis is the light coming out?
what is the meaning of liquidity analysis?
remember your 12th class
should I remind you?
in 12th class you had 3 books of accounts
sir don't remind me it was very difficult to do 12th class
accounts honestly it was such a heavy syllabus don't ask
once it becomes foundation syllabus
but 12th syllabus is very long and on top of that in so
many books there are so many questions in our books there
are at least 20-30 questions and you say your institute
makes you do difficult work there are 20-30 countless
questions do RTP, MTP well and pass you defame the institute
partnership with NPO second book was of your share and
debenture in which there were 3 chapters issue of share,
issue of debenture and redemption of debenture and one more
book was of your 20 marks in which there were 6 chapters
common size statement comparative statement financial
statement analysis one more theory was there schedule 3 was
also there and one chapter was cash flow statement
one more chapter was there in the name of accounting ratios
this chapter few years back was there in your
CA foundation accounts later it was eliminated accounting
ratios
so brother in accounting ratios if you remember we find a
ratio current ratio
we find current ratio current asset divided by current
liability
if you don't remember what was this ratio so let me tell you
current asset means in 12 months
the money you will get in cash
and current liability means the money you have to pay in
cash in 12 months
which you have to pay
so what we do with this ratio we see
whatever we have to pay one lakh rupees
compared to that the money which is coming that how many
times we cut it and we see two times that ratio is two times
we also call it 2 is to 1 2 ratio 1 if you have to pay one
rupee then two rupees are there if current liability is one
lakh then current asset is two lakhs and this is very
important ratio for any business because this tells you the
condition of next 12 months tells you the condition of near
future this is very important ratio and this ratio cannot
come out till till you get the value of stock why why sir
why brother what are you keeping in formula current asset
all current assets come in this
stock is also current asset so till you don't get stock you
can't get current asset so how this chapter helps you in
inventory when we know inventory then only we can calculate
ratio we can do liquidity analysis liquidity means in near
future there is flexibility there is liquidity or not money
is there or not we can do this so see inventory valuation
how important sir what we have to do theory point of view
should remember these five points and the things i have
told you you have to write in
words under these headings ca n't have to write lines here
it takes me 10 minutes i will type it here but that work is
not right we don't have to write but some people have
problem in study our second topic is also over meaning of
inventories yes sir yes but high yes yes yes Ronaldo style
Ronaldo celebration that is the most famous celebration
okay number two why valuation of inventories is important
why is valuation of inventories important very very good
another celebration how to find the
of inventories sir you told yesterday that inventories are
valued at cost price and market price which ever is lower
yes i agree with you and prudence concept sir who made this
rule we remember everything don't take it lightly okay but
here now little different and finished goods cost price and
market price which ever is lower inventories but here will
let you know work in progress or FG finished goods raw
material inventories are valued at cost price and market
price which ever is lower this
to get inventory value only finished goods and WIP
inventory will not apply on raw material but there is no
valuation of raw material that will be taught you
intermediate in accounting standard 2 you have to learn
there here all questions drafted in your syllabus are only
this is not the calculation of raw material ok still I have
written here to read once in case how to get value of raw
material there are two cases simple just listen once in
case how to get value of raw material there are two
simple just listen once in case how to get value of raw
material there are two cases simple just listen once in If
you think that the raw material of the wood is left in your
godown, when the finished goods paper will be made from
this wood, then we will sell that big rolls of paper for
profit.
In such a case, the value of the raw material of the wood
will be the cost price of the raw material.
If there is an expectation to sell the paper for profit,
then the raw material of the wood will be valued at the
cost price.
But if the market is in a bad state, if the finished goods
in which such raw material will be applied are expected to
be sold at below cost price.
If we are aware of the fact that the demand for big rolls
of paper has decreased in the market.
If the market has gone 20 years ahead, complete
digitalization has happened, paper is not used at all.
So we will have to sell big rolls of paper at a loss.
It has become outdated technology, paper is not updated.
In such a case, we will value the raw material of the wood
at cost price and replacement price, whichever is lower.
Replacement price means that today if we go to buy those
woods in the market, then how much will we get?
Cost price means that when we bought it, how much was it?
Those woods.
Cost price and replacement price, whichever is lower.
Once you put these points in your mind.
I do not think it is necessary to discuss raw material more
than this.
I also told you this because your notes will become
comprehensive.
If I go by the pattern of the institute, then I will tell
you about half of the inventory, then you go to the
intermediate and then you mug up things.
You will think what is going on, what was there, what is
here, how is it?
I have told you in this way in the foundation itself that
you will have full command on the inventory.
You read AS2, you will understand, I guarantee you.
And we have not even gone out of the syllabus.
We have not even gone out of the syllabus of the
foundation, do not even think about it.
I just took 2 minutes about raw material.
I have taken so much time for you.
Okay sir.
Now talk about this note.
What have you written in this note? That lower will be
selected on item by item basis.
I will give you an example for this and complete today's
discussion.
After this, our discussion will be complete.
Come on sir, tell me.
Write the example with me.
Example There are 3 items in the stock, P, Q and R. The
cost price of stock P is 38, Q is 29 and R is 17.
Assume rupees and lakhs.
If it is not 38 rupees, then it is not a business.
Net realizable value 42, 29 and 14.
There are 3 different items in the stock.
You have given the cost and NRV of all three.
If I calculate the total cost, cumulative cost.
Total cost is called cumulative cost.
So how much will come? 38 plus 29 plus 17.
Sir, this is 84.
And if I calculate the total cost of NRV, cumulative cost.
So this comes as cumulative NRV.
42 plus 29 plus 14.
This comes as 85.
So if I work on a cumulative basis.
These rules I have told you.
Cost and NRV.
Whichever is lower.
So according to this, the total cost is 84.
Total NRV is 85.
Lower is 84.
So our answer will be 84.
But I give one more view.
You have to listen to thinking.
We can also do this.
We take item by item lower.
And then total.
38 and 42 lower.
This will come in 29 and 29.
17 and 14 lower.
14.
What comes if you calculate the total? Sir, this is 81.
Our answer has changed.
The answer is 81 from 84.
So how to do?
First calculate the total.
Then take lower.
84.
Or first take lower.
Of all three.
Separately.
Then calculate the total.
81.
This confusion has also been removed.
And you have been told.
Lower will be selected on item by item basis.
First take the lower of P.
Then take the lower of Q.
Then take the lower of R.
Lower means value.
You do not have to take the lower to wear.
Then do the total after that.
81.
Then do the total after that.
81.
So your answer will be 81.
This is the correct answer.
84 is the wrong answer.
You do not know.
How many times this question has come in the exam.
Select the lower on item by item basis.
Many times this question has come from the inventory.
Okay.
So cover this example very well.
Understand.
Okay.
Sir, is our third topic also over? No.
We have covered some things in the third topic.
But in the next class.
We will take the discussion of the third topic a little
further.
Because.
Cost and NRV.
Whichever is lower.
You know.
Lower will be taken on item by item basis.
You know.
You have to apply this rule on finished goods and WIP.
You know.
This rule will not be applied on raw material.
It has something else.
It is not in your syllabus.
But you know that too.
Now we will see the cost and NRV in a little more detail.
In the coming lectures.
How do we get NRV?
I taught you the cost in the previous class.
We will take it in more detail.
How to calculate the cost and how to calculate the NRV.
Then we will go somewhere and reach the questions.
Okay.
Sir.
So please do the revision.
Let's meet in the next class.
Same time, same place.
Till then.
Bye Bye.
Thank you so much.
Any doubt.
Lecture related.
Course related.
Skills related.
If you have any problem in studying.
I have shared the contact number.
You can contact me on that.
Direct.
No problem at all.
Okay.
On channels.
On apps.
On Instagram.
Follow everywhere.
We will keep giving you benefits there.
In return.
You will keep giving us benefits.
I am not even saying that.
Your benefit is in it.
We also have a benefit.
Of course.
Then we will meet you in the next class.
Till then.
Bye Bye.
Take care.
Thank you.