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CA Foundation Inventories — practice questions

Explore 78 free Inventories questions in CA Foundation Accounting. Open each question or exercise to read its content, reference answers and available explanation.

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Inventories questions and exercises with answers

Showing questions 1–30 of 78.

Inventory is valued at the lower of cost and:Read the answer and worked solution →Which is NOT included in the cost of inventory?Read the answer and worked solution →Periodic inventory system determines cost of goods sold as:Read the answer and worked solution →Which method assigns specific costs to specifically identified items of inventory?Read the answer and worked solution →In FIFO method, closing inventory consists of:Read the answer and worked solution →If closing inventory is overstated, net income for the period will be:Read the answer and worked solution →Which expense is NOT excluded from inventory cost?Read the answer and worked solution →Stock of items P, Q, R have cost ₹38L, ₹29L, ₹17L and NRV ₹42L, ₹29L, ₹14L. Closing stock value:Read the answer and worked solution →Perpetual inventory system differs from periodic in that it:Read the answer and worked solution →Which of these is the principal advantage of perpetual inventory system?Read the answer and worked solution →Net realisable value for raw materials is generally taken as:Read the answer and worked solution →Disclosure of accounting policy for inventory measurement is required by:Read the answer and worked solution →Under LIFO, the cost of goods sold corresponds to:Read the answer and worked solution →Periodic system cannot detect:Read the answer and worked solution →Inventory turnover ratio is most affected by:Read the answer and worked solution →If opening inventory is understated, current year's net income is:Read the answer and worked solution →Cost of conversion includes:Read the answer and worked solution →Under weighted average method, value per unit at issue is computed as:Read the answer and worked solution →Adjusted selling price method is typically used in:Read the answer and worked solution →Borrowing costs may be included in inventory cost when:Read the answer and worked solution →If GST paid on raw materials is recoverable as input credit, the inventory cost is:Read the answer and worked solution →Inventory of slow-moving items is generally:Read the answer and worked solution →Periodic inventory taking requires:Read the answer and worked solution →Which costing method is it?Read the answer and worked solution →True or false: inventoriesRead the answer and worked solution →At what value are inventories carried under AS 2?Read the answer and worked solution →Net realisable value equals selling price less which costs?Read the answer and worked solution →An item sells for Rs 500, needs Rs 60 to complete and Rs 40 to sell. Its NRV is?Read the answer and worked solution →Cost Rs 120 a unit, selling price Rs 150, selling cost Rs 40. Value per unit?Read the answer and worked solution →Freight inwards on purchased goods is treated as?Read the answer and worked solution →

Worked practice questions

Inventory is valued at the lower of cost and:

  1. Net realisable value
  2. Replacement value
  3. Original purchase cost
  4. Future expected price
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Correct answer: A. Net realisable value

1. The principle of conservative accounting requires inventory to be measured at the lower of cost and net realisable value (NRV). 2. NRV equals estimated selling price less estimated costs of completion and sale. 3. Replacement value applies only as NRV proxy for raw materials in some cases. _Source: ICAI BoS Foundation Paper 1, Ch 4 "Inventories", §3 ¶1_

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Which is NOT included in the cost of inventory?

  1. Freight inwards charges
  2. Storage costs of finished goods
  3. Direct conversion labour
  4. Non-refundable purchase duties
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Correct answer: B. Storage costs of finished goods

1. Cost of inventory includes purchase price (less recoverable taxes), conversion costs and costs to bring inventory to present location and condition. 2. Storage costs of finished goods are post-production overheads excluded by AS 2. 3. Freight inwards, conversion labour and non-refundable duties are all part of cost. _Source: ICAI BoS Foundation Paper 1, Ch 4 "Inventories", §3 (b)_

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Periodic inventory system determines cost of goods sold as:

  1. A direct ledger calculation
  2. An estimated standard cost
  3. A residual figure each period
  4. The same as opening stock
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Correct answer: C. A residual figure each period

1. Periodic system relies on actual physical count of inventory at period end. 2. Cost of goods sold = Opening + Purchases + Direct expenses − Closing. 3. Closing is counted; COGS is the residual difference. 4. Hence COGS is a residual, not directly ledgered as in perpetual. _Source: ICAI BoS Foundation Paper 1, Ch 4 "Inventories", §4.1 ¶2_

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