As per AS 2, cost of inventory includes: MCQ with Answer and Explanation

As per AS 2, cost of inventory includes:
A. Selling expenses
B. Cost of purchase, cost of conversion, and other costs to bring inventory to present location and condition
C. Only purchase price
D. Only conversion cost
Answer: Option B
Solution (By JKSSB Mock Tests)
AS 2 defines cost of inventory to include all costs of purchase, conversion, and other costs incurred in bringing the inventory to its present location and condition.

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Practice More Accountancy and Book Keeping Questions

Question #1
A firm's assets ₹6,00,000, liabilities ₹1,00,000, normal rate 10%, average profit ₹75,000. Value of goodwill by capitalization of average profit method (total value less net assets) is:
A. ₹75,000
B. ₹2,50,000
C. ₹1,00,000
D. ₹1,50,000

Correct Answer: Option B


Explanation:
Capitalized value of average profit = 75,000 / 10% = ₹7,50,000. Net assets = 6,00,000 - 1,00,000 = ₹5,00,000. Goodwill = 7,50,000 - 5,00,000 = ₹2,50,000.

Question #2
Assertion (A): The Public Financial Management System (PFMS) integrates with the Core Banking Solutions (CBS) of banks. Reason (R): This integration ensures that funds are credited directly to the beneficiary's account, eliminating leakages. Choose the correct option.
A. Both A and R are true but R is NOT the correct explanation of A
B. A is true but R is false
C. Both A and R are true and R is the correct explanation of A
D. A is false but R is true

Correct Answer: Option C


Explanation:
PFMS integrates with CBS to enable Direct Benefit Transfer (DBT). This direct credit to beneficiary accounts ensures transparency and eliminates middlemen, correctly explaining the purpose of the integration.

Question #3
Which of the following is a feature of marginal costing?
A. It distinguishes between fixed and variable costs
B. It is used for external reporting
C. It values inventory at full cost
D. It includes fixed overheads in product cost

Correct Answer: Option A


Explanation:
Marginal costing strictly separates costs into fixed and variable components, charging only variable costs to the product.