Question

Q.26.What is the accounting treatment of ‘Stores and Spares’ when the company will calculate its Inventory Turnover Ratio? (1)

Answer 1

Answer:

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Explanation:

Why we include stores and spares in inventory?On-premise and cloud data protection in times of uncertainty.Stores and spares must be under inventory.

Stores and spares are basically assets to any type of organisation which are revenue in nature.

So we cannot sarcastically place them on fixed assets because of their big name.

We have to place them under the current assets specifically under the inventory.

Inventory is a category of current asset where regular stocks are held in the business such as raw materials,work-in-progress,finished stock etc.

Spares and stores are parts of machines,raw materials for main product ,etc.

So they clearly come under inventory.