Under the International Financial Reporting Standards, IAS 2 deals with inventories. Define the following terms:
i. Inventories (4 marks)
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Inventories are assets:
- Held for sale in the ordinary course of business.
- In the process of production for such sale.
- In the form of materials or supplies to be consumed in production process or in the rendering of services.
- Goods purchased and held for resale e.g. goods held for sale by a retailer, or land and buildings held for resale.
- Finished goods produced.
- Raw materials.
- Work-in-progress.
ii. Net Realisable Value (2 marks)
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Net realisable value is the estimated selling price in the ordinary course of business less the estimated cost of completion and the estimated cost necessary to make the sale.