We are writing examples for NRV 100 pieces of big rolls of
paper
And I think there is no need to tell you that big rolls of
paper are finished goods
First timber, wood, bamboo
We make pulp from it, then big rolls of paper
So we are talking about finished goods
There are 100 big rolls of paper
Let me show you the photo
If you have forgotten in the last class
This is the photo
These are the big rolls of paper
We have 100 rolls of paper like this in stock
They are not sold yet, they are in stock
In stock
Full stock
Expected sales price is Rs.1000 per roll
This is not that kind of roll
Sir, I am drooling, don't talk about rolls
This is paper roll, make your heart understand
You are always talking about rolls and fast food
The more you eat fast food, the less you will think
And the less you think, the less marks you will get in exams
I don't remember honestly speaking
When did I eat this roll last time
And this, it keeps you healthy
And if you want to perform best in any field
Then you have to perform best in your health
It is expected that at the time of sale
There will be freight and insurance cost of Rs.10,000
What is this example?
I get it written in illustrations type
It is simple language
So that even if you read it later, you will understand
And to make such sale
Rs.5000 advertising cost has to be incurred
Has to be incurred
Find NRV
Net Realizable Value
Find NRV
Sir, the number of examples you gave in the last class
NRV means the number of items in the stock
There is hope to sell
What is its expected selling price
According to that, sir
100 pieces
And you are telling the selling price of one piece
It is expected to sell for Rs.1000 per roll
So according to this, Rs.1000 x 100
Rs.1,00,000 Yes, but
NRV doesn't just mean
The more you hope to sell
That will be your net realizable value
Realizable value means
What will you get by selling
But as soon as the net word comes
Net means
If you have to spend something while selling
Minus them
Then tell what is in the net hand
So you see
Before selling
While selling
You have to do this
Before selling
Advertising cost of Rs.5000 will have to be incurred
Advertising cost of Rs.5000 will have to be minused
Advertising cost of Rs.5000
It will sell only when you add
If you don't do advertising
Then how will the goods sell
And when the order comes
Then you have to spend Rs.10,000 on delivery
In freight of goods
And insurance
You have to spend Rs.10,000 there
So by minusing that
What will you get in the net
Tell that
Sir, we are getting
Rs.85,000 So this will be
NRV Rs.85,000 We will call this
NRV
Means Means Means We call these two
Advertising cost of freight and insurance
They are called selling expenses
When we have to spend while selling
They are called selling expenses
So see
What I have written in the notes
How to calculate NRV
In that I have written
To calculate NRV
From estimated sale price
You have to minus selling expenses
And whose NRV is this?
This is the NRV of finished goods
Sir, are NRVs different?
Yes Stock is of three types
Raw material, WIP and finished goods
So their cost will also be of three types
And their NRV will also be of different types
There are not many differences
But still
There are small differences
I have written in the notes
In selling expenses
Marketing like advertisement
Distribution And other selling costs
Like freight, insurance etc
Okay Second example
Sir, you gave this example
To calculate the NRV of finished goods
You are right
Absolutely right
This was the example to calculate the NRV of finished goods
Second example is coming
Write Sir, change the color
I also felt the same
Take this
There are 100 MT
What does MT mean?
Metric ton
Oh It is a unit
Unit of measurement
Of pulp in stock
From big roll of paper
Came towards pulp
Sir, are you talking about WIP this time?
Very good
Now we are learning to calculate the NRV of WIP
In this example
It will be converted
In paper
Write two papers
By incurring
An expense of
Rs. 150 per MT
Full stop
And then
100 paper rolls
Will be made out of it
Expected selling price
Of 100 rolls
Is Rs.
1000 per roll
Freight and insurance
Will be same to same
Rs. 10000
And advertisement
Will be same to same
Rs. 5000
Note it quickly
Please note it out
The demand of the question is
Take out the NRV
Sir You just told two minutes ago
NRV means
Estimated selling price
Yes Minus
Selling expenses
Yes, absolutely right
According to that
What answer comes according to that?
According to that
When WIP will become finished goods 100 rolls will be sold
in 1000
Minus selling expenses
Sir, the difference is the same
Rs. 15000
It is the same
Then what is the difference?
Why am I writing two examples?
Am I a small child?
I remembered Tiger Shroff suddenly
Am I a small child
That I will make you write two same examples?
No, sir
So, there is a twist in this
What? Brother These 100 rolls
Will be sold as finished goods
When the moment in 100 MT
Will be converted in paper
You have to incur some further cost
Then the goods will be ready
Then it will be sold
So, the further cost you have to incur
Minus that
You have to put some money in your pocket
You are talking about earning
First, remove what you have to put in your pocket
So, sir
According to 100 MT 150 per MT
Expenses Means Rs.
Now you will see
Your NRV will come
Rs. 75000
Rs. 70000
Means I am going to say a very important thing
Work in progress
To get its NRV
We have to see
When it will be ready as finished goods
So how much will it sell?
NRV Estimated selling price
We will have to buy finished goods here
Although we are getting the NRV of WIP
Estimated selling price
We will have to buy finished goods
We don't have to sell WIP
We convert it
And sell it in finished goods
Finished goods
So, you have to buy finished goods
Selling price and selling expenses
But one more thing will be minus
Further cost
To reach there
You have to spend
So, that will be minus
Here I have written
While removing WIP's NRV
Estimated selling price
Minus selling expenses
Minus Further cost of completion
Whatever you have to spend example number 3, I would like
to remind you once again and I would like to tell you, you
refer my notes after becoming a CA, you will get a lot of
help in inventory, I genuinely promise.
Today, I am going to tell you my experience.
It is very important, I am going to give you examples, I
will give you examples, I will give you examples.
I will give you examples.
The examples that I write will make your base.
When you become CA, then leave it.
When you go to the CA office on the article ship, the boss
on the article ship will send you to the client place that
go dear children, we will give you conveyance, we will give
you food money.
You just go there and do the work, do the audit or bring
their stock.
Then you will go there and you will get so confused, I am
saying to you from my heart,
I'm telling you from the bottom of my heart, it happened to
me, that's why I'm telling you.
You will be so confused that how can I take the inventory?
There is only stuff kept here.
Just count the stuff and how much is this inventory?
You will call, sir, yes, there is so much stock, they will
say, what is it, we have to find the value. What are you
telling us?
We have to find the value.
You are counting and telling.
Even a small child can count.
Then you will say, what price should I put?
From where should I get the bill? If you ask them this, you
tell them, what are their values?
They will say, why has the auditor come?
He is asking us, he is asking the management.
Now one by one such things will come out.
You will know that there are many methods to find the value
of inventory.
And which method will apply to which client, you will
understand this only when you learn the methods.
Then you go to the client place.
Then you see what type of inventory they have.
Then even if you use these notes, if you try which method
will apply, then you will be successful.
And anyway, there must be an accountant sitting there.
That accountant must have already applied the method to the
inventory.
You will have to understand that, okay, this is from there,
from where sir told, this is like this.
Believe me.
Otherwise, if you go to the article chip, you will see.
Although you are taught on the article chip, but not too
much.
The CFM gives you money.
So they want you to work for them.
Don't argue too much with anyone.
Mostly you have to learn by yourself.
By living with the senior, asking him, by using your brain,
you have to learn by yourself, remember.
If you think that in the article chip, some CA will sit
with you, will wave his hand on your head twice, will clap
you and say, dear son, this is how it happens, nothing like
this is going to happen.
CA doesn't have time, brother.
Tomorrow you will not even have it, you will get it.
Okay.
There are
100 pieces.
This time there are 100 pieces of raw material.
What was the raw material?
Bamboo woods, bamboo woods.
Paper was made from it.
At the rate, 5 kg per wood, that is, 500 kg of wood is
total, 500 kg in total.
The price of
1 kg bamboo wood
at present
is Rs. 10.
However,
the purchase price was 8 per kg.
Find NRV.
Do you know what is the NRV of raw material?
There is nothing easier than this.
The NRV of raw material is equal to replacement price.
Realizable value means how much is this product in the
market.
So the meaning of replacement price
I just told you that if we go to buy wood today, how much
will we get?
What is the price in the market today?
Replacement price and NRV have the same meaning.
It becomes the same here.
What is the replacement price?
Sir, 500 kg of wood is 500 kg.
The price of 1 kg is 10 in the market.
So 500 kg x 10 will be 5000.
Sir, what is Rs.
Brother, they bought it for Rs. 8.
This is the cost price of wood.
Rs. 8 per kg is the cost price.
It has no meaning.
If you want to find NRV of raw material, just find the
replacement price and the work is done.
NRV is equal to replacement price in the case of raw
material.
The problem is that our institute did not leave any room
for the children to worry.
Although our institute was one of the best and will always
be.
But sometimes there are some ups and downs.
There are some unavoidable things that we can never get out
of the institute.
That's why we got the degree.
The institute did some ups and downs unwillingly.
What happened?
Inventory, my dear friends, has AS2 on it.
AS2 has been kept in the intermediate in detail.
And without AS2, I asked you here in the foundation about
some things.
Everything is scattered.
This is why it has become confusing for the students. I
assure you that these notes, comprehensive notes, follow
them for intermediate AS2.
There is no problem.
Sir, are you teaching us extra?
I am not teaching you any extra point.
I am teaching you the same material.
I have just removed the mess.
I have collected the mess.
So you will not have any problem.
I am writing a small example about raw material and I am
taking your 2 minutes. I can say with love, leave the raw
material, you have to see it in intermediate.
You will never be able to make the complete image of
inventory.
You will leave the topic.
Then you will go there, they will say in intermediate that
you have studied this much in the foundation. Then you will
not be able to see the comprehensive picture.
That's why, whether it is raw material, I have told you
everything.
Sir, what is the last note that you have written?
In case NRV is missing in question, inventory will be
valued at cost price only.
Brother, I have taught you the rule that cost or NRV
whichever is lower. But suppose, the question has given you
only cost and not NRV.
So what will you do?
Will you fight with the question?
Will you throw pen and paper in the exam and call the
supervisor?
Our sir had taught us the question of cost or NRV whichever
is lower. In this, NRV is not given.
Only cost is given.
So what will the supervisor say?
Brother, take it out according to the cost.
Why do you bother me?
The same thing is happening here.
If NRV is not given in the question and is missing, then
take out the simple cost.
The cost that will come, that is your answer.
Then you do not need to take lower in the question. There
are such questions in which NRV is missing.
So take out the simple cost.
There is no need to take NRV.
There is no need to take lower in it.
Then you will have to study.
There will be no problem.
There will be no NRV.
There will be no need to take lower.
Okay, this is about NRV.
I have explained to you completely how to calculate NRV.
If there is any true or false then what is wrong?
We have done two small examples.
If we get two true or false from there, then we will get
gold.
Let me tell you another name for raw material.
I just remembered.
The name of raw material is pre-production inventory.
I just told you for general knowledge. If you see it
written in a heavy place, then do not worry.
Raw material is also called pre-production inventory.
The word will be used in your paper.
That's why I am telling you.
Okay, NRV is done.
Now let's move on to the discussion of cost.
Let's move on to the discussion of cost.
Shall I show you the notes?
Will you be a little scared?
Krishna and Kiku Sharda do it on TV.
Will you go to the jungle as a fake Sanya and Dharmendra?
Will you bring a lion?
Will you be scared?
I will show you the notes.
Look at the cost notes.
How to calculate cost? Sir, I am getting scared.
Heartbeat has gone above 130.
For a manufacturer.
Sir, there are notes here.
Sir, our blood pressure is increasing.
Cool down.
Like in 2-3 examples, I killed NRV.
In the same way,
I will also kill the cost.
Why are you scared?
It is going on in a lot of trending.
I also remember it again and again.
Are you a small child?
Why are you scared?
Example no.
Let's write down.
Now the discussion of cost has just started.
How to calculate cost?
Everything is written.
Like the example of NRV
And I explained it to you.
In the same way, I will explain the example of cost.
And then I will explain what is written in the cost.
Mr. X
Now I will remind you of our first class.
Where we used to take the example of T-shirt.
Mr. X is the owner of a showroom.
He is a showroom owner.
It is a good showroom.
If you want anything, tell me.
It is in my neighborhood.
I will get it parceled from here.
He is asking if it is real or fake.
It is fake of course.
He purchased 200 T-shirts The seller allowed a discount of
Rs. 100 per t-shirt.
Non-refundable GST paid 5%.
Freight was paid Rs. 25 per unit i.e. Rs. 5000 in total.
Find out value of inventories in stock if 20 t-shirts are
there left in stock.
Find out cost price of unsold t-shirts in stock.
There can be 3 approaches to find cost.
1. Per Unit Approach 2.
Basic Purchase Price 3.
Discount 4.
Non-refundable GST 5.
Freight 5.
Basic Purchase Price 6.
Finish Goods 6.
Finish Goods 7.
Total Approach 1.
Basic Purchase Price 2.
Total Discount 3.
Net Purchase Price 3.
Net Purchase Price 4.
Total Cost 1.
Basic Purchase Price 1.
Basic Purchase Price 3.
Total Cost 4.
Total Cost 5.
Total Cost 3.
Mixed Approach 1.
Basic Purchase Price 1.
Basic Purchase Price 2.
Total Cost 3.
Trader 3.
Trader 3. Basic Purchase Price minus Discount and Rebate is
equal to Net Purchase Price plus Non-Refundable Taxes plus
Directly Attributable Cost
Like Freight Insurance
And you have to take this per unit
Then Cost per unit will come out Multiply it by 20
Number of Units in Stock, your Value of Finished Goods
Inventory in Stock will come out
In Total Approach, do the exact same thing
Just take the total figure
First divide it by the total unit
Then multiply it by 20
How many units are there in stock
Then your answer will come out 11000 is same to same
In Mixed Approach, you have to do the same thing
What you have to do in Mixed Approach is
Here Per unit price value is directly multiplied with
number of units in stock at each step
Write it here
At each step
Multiply it directly at each step
Now the way the data will be given in which question
We will apply the same Approach
Ohh Sir, we were already scared
See With one small example
We have calculated so many big things
You were unnecessarily getting scared
You don't know
When you were getting scared, my blood pressure was also
increasing
How will this happen
See, it is simple, nothing at all
Come Let's move ahead
We already know about Trader
Now you will talk about Manufacturer
What else
You are getting very fast
We don't have any example for Manufacturer
Because it will be repetition of work
In Manufacturer also
Everything is same to same
Everything is same in Manufacturer
See A to Z
In Manufacturer's case
There are three types of stocks
Raw material, WIP and Finish Goods
See friends
I have already told you about Finish Goods
How is it
Basic Purchase Price
Minus Trade Discount
Net Purchase Price
Non-Defendable Taxes
Directly Attributable Cost
But when it comes to Trader
It stops here But in Manufacturer's case
We will have to add labor and overhead
Like Conversion Cost And some other cost
Why is it like this
Because it is Manufacturer
Trader buys directly And sells Finish Goods
Manufacturer has done this work
He must have done this on raw material
He must have bought raw material
Taxed on it Directly related cost must have come
He must have freighted it and brought it to Manufacturer
Then he must have
Converted it
In Finish Goods and WIP
So that conversion cost
Will come here And other cost will also come here
If anything is given in question
So a little space increases
In Manufacturer's case Trader buys directly
Finish Goods
But here
Manufacturer only buys raw material
Then it will go ahead
He will convert and make Finish Goods So these expenses
will also be included here
And if
Manufacturer only wants to talk about raw material
Will it stop here?
Sir, please explain a little
What are you trying to say?
I am trying to say something very simple
If I have to calculate
Cost of raw material
In Manufacturer's stock In Manufacturer's stock
There will be three types of stock One will be raw material
One WIP and one Finish Goods
If I have to calculate
Cost of raw material
For Manufacturer
Then it will be the same
It has not converted yet
Why will I take conversion cost?
So discussion about raw material will remain the same
If WIP or Finish Goods
Is to be calculated for Manufacturer
Then conversion cost will increase
And here also Per unit, total and mixed approach
Can be followed In Manufacturer's case
Whether it is raw material or WIP And here I have written
Here, figures are to be considered considered for raw
material only.
When raw material will be taken out, then in this table,
only raw material's purchase price, raw material's
discount, raw material's taxes and raw material's freight
and insurance will be taken.
When WIP and finished goods will be taken out, then
conversion cost and other cost will also be added.
Okay sir.
So this is very simple sir.
We were already scared.
Of course this is very simple.
Okay.
So now whether you want to take out cost for manufacturer
of raw material or WIP finished goods or for trader you
want to take out cost of finished goods.
Trader doesn't have raw material WIP.
So there are some things which will never be included in
cost.
Whether you take out cost of trader or manufacturer.
Whether you take out cost of raw material or WIP or
finished goods.
These four points will never be included in cost.
Do you remember in depreciation, what was not included in
cost?
Stipend.
Stipend was not included in cost.
Was it stipend or Asia?
It was AWS.
Okay.
If you don't remember, you can see in notes.
Interest and other borrowing cost.
If you have taken loan to manufacture goods and you are
paying interest on it.
Then don't make that interest as part of your inventory
cost.
Why sir?
I will tell you practically.
Not theoretically, I will give you reason.
Listen to me carefully.
You believe one thing, whatever your cost is you take out
your profit and set sale price accordingly.
Assume that the cost of my class is Rs.
Accordingly, I will add profit and decide sale price.
Assume that another batch is costing me
Rs. 6000, then its cost price is not expensive and its sale
price will be expensive because its cost is also expensive.
So, it depends on cost that what is our sale price after
adding profit.
One person has his own money.
He makes goods with his own money.
So, it will be cheaper.
And another person is you.
You are taking loan from someone to manufacture goods.
So, you will have to pay interest on it and your goods will
become expensive.
The person who is making goods with his own money, he does
not have to pay interest.
For him, goods will be cheaper and its cost of
manufacturing will be cheaper.
And your cost of manufacturing will become expensive
because you are making goods with interest and you have to
pay interest.
So, if you add that interest to your cost, then your cost
will also become expensive and your goods will also become
expensive.
Then tell me one thing, who will buy from you?
The same goods a person is giving at a cheap rate, you are
giving at an expensive rate.
Who will buy from you? No one will buy.
Everyone will say that the same goods are being given at a
cheap rate.
We will buy from him.
He is making goods with his own money. He does not have to
pay interest.
His goods are cheap.
Why should we buy from you?
That is why you are helpless.
You will have to pay interest and you will not be able to
make that interest a part of your inventory cost.
Otherwise, you will be out of the market.
You will lose the competition.
So, what should we do with that interest?
Transfer it to P&L.
Take it in indirect expenses to Profit & Loss Account.
Inventory, trading account, do not consider that.
Okay.
Abnormal loss of material labour and overhead.
Listen.
Have you ever stitched clothes?
Even though you are of a new generation, you have not
stitched.
But in the beginning, I remember very well when my family
used to take me to a tailor's shop.
Clothes used to be selected there.
After the clothes were selected, they used to measure the
clothes according to the size of the person.
Then the tailor used to take the measurement and according
to that, your clothes are prepared.
Shirt, T-shirt, pants, etc.
So, in the example of a tailor, let's say there is a tailor.
Is there a tailor around us?
Do you remember the name?
What is the name of the tailor? Prince tailor.
Prince tailor is being told.
There is a prince tailor around us.
There is one.
Prince tailors.
So, what do the prince tailors do? For an average height
person, to make a pant, they take 2.5 meters of cloth.
They use 2.5 meters of cloth.
In 2.5 meters of cloth, you know that if you want to give a
shape to the pant, then you have to do cutting.
Then after cutting, what is called cutting, cutting is
collected. So, from 2.5 meters, let's say, half a meter of
cutting is done and only 2 meters of the actual pant comes.
This half a meter is called normal loss.
This loss will definitely happen.
Without this loss, the pant cannot be made.
This is called normal loss.
But, if by mistake, it happens that to make the pant, from
2.5 meters of cloth, 1 meter of cloth is used for cutting.
Look at that ad, you have reduced father's pant by 1 meter.
This tailor has reduced father's pant by half a meter.
Then the actual pant will be of only 1.5 meters.
Okay, let's leave the fact that the actual pant has become
small.
Tell me how much is your abnormal loss in this case?
Abnormal loss, which should not have happened, sir, half a
meter, half a meter, only and only half a meter should have
been lost, it was a loss of one meter, that is, half a
meter which is an extra loss, that is called abnormal loss,
we call it abnormal loss and this is because of your
mistake, if you have made it a part of your inventory cost,
then your inventory cost has become expensive, then you are
in a situation to recover it from the
it is wrong, abnormal loss has occurred due to your
mistake, do not make it a part of your inventory cost, do
not try to recover it from the customer, otherwise you will
be out of the market, so these things are written for your
good, okay, okay sir, it will go away, storage cost will
never be a part of it, storage cost, except when incurred
in production process, I will give you an example, our
inventory is ready, stock is ready, we have kept it in the
godown, it is absolutely ready, finished
are in saleable condition and we pay the rent of the godown
5000 rupees, so this rent of the godown 5000, do not make
it a part of the inventory cost, why?
Inventory is ready, this is just the expense of keeping it,
this is a separate indirect expense, it will come in P&L,
it is written in AS2 that the cost of inventory will come
only when the inventory is ready, so the inventory is
ready, after that if you are just keeping it in the godown,
then the rent of that godown will not be included in the
cost of inventory, it is a separate expense, it will go
separately in P&L account, okay sir, storage cost will not
be a part, but if it is kept in the
as a part of the production process, then it will become a
part of your inventory cost, what does this mean?
This means that the goods are not ready yet, if the goods
are not ready yet, then that expense will become a part of
the inventory cost, because you just told, AS2 has said
that you have to take the expense until the goods are ready
and inventory is ready, if it is not ready yet, then it
will become a part of the cost of inventory, I will give
you an example, wait, there is a product which has to be
stored in a cold place to be made, first it has to be
stored in a cold warehouse, then further
is done on it and it comes in the form of finished goods,
so at that time when you are keeping that product in the
godown, you are keeping it in the cool area, you are
keeping it in the cold storage, till then it is not ready,
it is a part of the process, then the rent of that godown,
storage is included in the cost of your inventory, in
simple words, if the goods are ready, then the godown rate
will not come, if the goods are not ready, then the godown
rate will definitely come in the cost of
selling and distribution cost will not become a part of the
cost of inventory, because it is the expense of selling,
the goods are ready, you are selling it, then why will you
take it?
So the main crux is that till the goods are ready, the
expense of inventory will come in the cost of inventory, it
will not come beyond that, and while making the goods,
while making the inventory, if you have made an abnormal
event due to your own mistake, some abnormal loss has
happened or due to the lack of your own money, you have
invested money on interest, then that interest will not
come in the cost of inventory, and that abnormal loss will
not come in the cost of inventory, so that you
not get out of the market.
That is why I am giving so much emphasis on this, this
theory question can be made in four numbers very lovingly,
so you have to write these four points, along with that you
have to elaborate a little, that is why I have told you so
much about it, okay sir, okay, so today we saw how to
calculate cost and NRV, now our topic is completely over,
how to find the value of inventories, I will make you
revise it in two minutes, how to find the value of
inventories, to find the value of inventory, you
to see if it is finished goods or WIP, then cost or NRV
whichever is lower, and you have to take it on a lower item
by item basis, okay, if it is raw material, then the
finished goods in which we will put it, if there is a hope
to sell it at profit, then at cost price, if there is a
hope to sell it at loss, then at replacement price, okay
sir, thereafter how to find cost and NRV, we should know
this also, so how to find cost and NRV, my dear friends,
for that we have to see NRV first, in NRV,
there is NRV of raw material, simple, replacement price is
its NRV, if there is WIP, estimated selling price, whose,
this is not estimated selling price of WIP, this is
estimated selling price of finished goods, minus further
completion cost, minus selling expense, and if there are
finished goods, then estimated selling price minus selling
expense only, because it is finished, now there is no
further completion cost on it, so there is no need to minus
it, in selling expense, distribution,
and selling cost comes, if NRV is missing, then take cost
and that will be your answer, there is no need to compare,
how to find cost, for the trader, in finished goods, there
are 3 approaches, per unit, total and mix, do it with
anyone, the answer is same, if we talk about manufacturer,
then he has 3 types of stock, raw material,
WIP and finished goods, for raw material, it is same, in
WIP and finished goods, conversion cost and other cost will
come, here also you can follow per unit, mix and total
approach for manufacturer, as simple as that, tomorrow we
will make you do periodic and perpetual
analysis, in this, tomorrow we will finish 5 questions of
study material, after finishing 1-2 discussion, we will
finish all conceptual things tomorrow, and tomorrow will be
our 4th class, after 4 classes, we will take 2-3 more
classes, to finish all questions, so there are not many
things left in this, keep on revising, see you tomorrow in
next class, today's class is over, today's celebration, bye
bye, tata, thank you.
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