Accounting Standard 2 vs ICDS 2

AS 2 talks about exclusive method of accounting i.e taxs and duties which are recoverable from tax dept not to be added to the cost of inventories

FOR VALUATION OF FG.,excise duty is to be added to the its value and provion for excise duty is to be made on the debit side of trading account. Hence it doesnot impact the profit and loss account.

SECTION 145A TALKS ABOUT THE INCLUSIVE METHOD ie, all the duties and taxes even if recoverable are to be added to the value of inventories, purchases and sales.

WHAT IS EXCLUSIVE METHOD??

INPUTS are to be recorded at cost without duties

SALES  are to be recorded at net of duties or taxes

TAXES ON PURCHASE  are to be debited to separate account says excise duty on purchase account

DUTIES ON SALES  entered on separate a/c say excise duty on sales a/c.

Entries on excise account on purchase adjusted with excise account on sales and net excise duty daty payable with PLA or refundable.

THE METHOD IS PERMITTED BY AS 2

                                                                PROFIT AND LOSS A/C

OPENING STOCK	100	SALE FG	2000
PURCHASE RM	1000	CLSOING STOCK OF RM	200
MFG EXPENSES	500	CLOSING STOCK OF FG WITH EXCISE DUTY	220
EXCISE DUTY ON FG(PROVISON JO FG KI CLOSING STOCK MEIN RAKHI HAI)	20
GP	800

WHAT IS INCLUSIVE METHOD??

Cost of Input recorded at total amount paid to the supplies inclusive of duties and taxes.purchase mein jo input credit ki figure shud be debited to separate a/c say CCR AVAILED.

SALES AND INVENTORIES  both are to be recorded at including duties

THIS METHOD IS NOT PERMITTED BY AS 2. Hence books are to made at exclusive method . HENCE section 145A comes into picture where adjustment is to made in all cases where exclusive method is followed. IF BOOKS ARE MAINTAINED BY INCLUSIVE METHOD THEN NO ADJUSTMENT UNDER SECTION 145A IS REQUIRED.

But Practically (like in sharp chucks) hum books of accounts as hi as per inclusive method se bnnate hai.,and trading and p&l account hi as per inclusive method hi bnaate hai.,.

                                                PROFIT AND LOSS ACCOUNT

OPENING STOCK	110	BY SALE FG(WITH DUTY)	2200
PURCHASE RM(WITH DUTY)	1100	CLOSING STOCK RM(WITH DUTY)	220
MFG EXP	500	CLOSING STOCK OF FG WITH DUTY	220
EXCISE DUTY ON SALES(SALE WALI FIGURE MEIN JO INCLUDE HAI)	200
PROVISON FOR EXCISE DUTY ON FG( FG MEIN JO EXCISE DUTY INCLUDE HAI USKI PROVISON BNAA LO)	20
GP

SECTION 145A COMPLIANCE AS PER TAX AUDIT REPORT

 This compliance is required to be made in tax audit report for complying section 145a coz profit and loss and accounts of the entity are  made following exclusive method as perAS 2..,this means ke hame computation mein as per inclusive method se closing stock ki value krni hai…jo ke icds bhi yehi kehta hai.,.agar books of accounts already inclusive method se bnaa rahe hai(NO DOUBT AS-2 NOT PERMITT IT) then section 145A ki compliance krne ki zarurat hi nahi hai(ie not need to show working about effect on profit due to valuation).,..nd ICDS mein bhi kuch extra krne ki zarurat nahi hai.,.coz hum apni trading and p&l hi as per hi inclusive method se bnnaaa rahe hai..,

In form 3CD hum clause 19 mein section 145A ke bare mein already mention krte hai.,hum icds 2 mein hum inventory ki valuation ke disclosure ke bare mein clause 19 kaa refer kr denge.,.,and relieve ourself from ICDS 2.