This case study discusses inventories at VST Tillers Tractors Ltd. It defines inventory and its classification. Inventories are valued at the lower of cost or net realizable value. Cost includes purchase cost, conversion cost, and other costs. Net realizable value is the estimated selling price less costs to sell. The case study provides inventory figures for VST Tillers for March 2013 and March 2012 and breaks down the 2013 figures into raw materials, work in progress, finished goods, and consumables. Common inventory valuation methods are also outlined such as FIFO, LIFO, weighted average, and standard costing.

1. HC1 - Accounting Theory
C2 - Case study Seminar Presentation
Topic : Inventories
Name : Shivaswamy M
Class : I semester
Section : ‘B’ sec
Tutorial Batch : HB3
Programme : M.Com.
Department : DOS in Commerce,
University of Mysore, MGM
Total Pages :
Submission Date :21/11/2013
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2. VST Tillers Tractors Ltd
•V.S.T. Tillers Tractors Limited (VTTL) was incorporated on
December 18, 1967 in Bangalore, India.
•It is an Auto mobile company.
•The company products or deal with Tractor, Tillers, Diesel
Engines, Harvestors, Reapers, Binders, Transplanters /
planters, Trench Cutters, Front end Loaders and all kinds of
allied agricultural, plantation and horticultural machinery
including attachments, components, accessories, spares
implements and other equipments required for the
satisfactory functioning of the agricultural equipments.
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3. Case study on Inventories Of VSTT Ltd.:
Inventories are valued at the lower of
cost and net realizable value. Cost of inventories comprises
of cost of purchase, cost of conversion and other costs
including manufacturing overheads incurred in bringing
them to their respective present location and condition.
Cost of raw materials, consumables, stores and spares,
trading and other products are determined on weighted
average basis.
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4. Terms of the case study
Inventory
Classification of Inventory
Measurement of Inventory
Inventory Valuation
Objectives of Inventory Valuation
Methods of Inventory Valuation
Net Realization Value
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5. Inventory :
• Inventory means stock of material or goods held by a
concern to meet its future requirements of production
or sale.
• Inventory are tangible property held for sale in the
ordinary course of business.
• It is used in the process of production for such sale or
for consumption in the production of goods or services
for sale.
• Inventory also includes Consumable stores and spare
parts meant for replacement in normal course.
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6. Classification of Inventory:
• Raw Materials
• Work in Progress
• Finished Goods
• Finished Goods for resale
• Consumable stores
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7. 5,52,14,136
9,51,24,217
2,63,50,260
12,96,54,463
30,63,43,076
6,15,26,481
41,31,28,736
4,47,56,315
8,89,57,543
60,83,69,076
(30,20,26,000)
AS at AS at
March 2013 March 2012
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8. AS at
March 31,2013
20,10,98,894
-
6,15,26,481
41,31,28,736
8,89,57,543
4,47,56,315
1,58,53,392
32,51,052
82,85,72,713
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9. Inventory valuation:
• Accounting Standard – 2
• It comes into effect in respect of the accounting period
commencing on or after 1/4/1999.
• Is an accounting procedure and methods adopted to
compute the value of inventories.
• Inventories are valued at the lower of cost and net
realizable value.
• Objective :
* To determine the true income
* To determine the true financial income
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10. Cost of Inventory
Cost of Purchase
Cost of Conversion
Other costs
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11. Net Realisable Value
Net realizable value (NRV) is a method of evaluating an
assets worth when held in inventory.
NRV is part of the GAAP and IFRS that apply to valuing
inventory, so as to not overstate or understate the value of
inventory goods
 Equal to the selling price of the inventory goods less the
selling costs.
It is expected sales price less selling costs
the market value of an inventory is not always available, NRV
is sometimes used as a substitute for this value.
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12. Methods of Inventory valuation:
• FIFO (First in First Out)
• LIFO (Last in First out)
• SAPM (Simple Average Price Method)
• WAPM (Weighted Average Price Method)
• BSM (Base Stock Method)
• SPM (Standard Price Method)
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13. Conclusion:
Raw materials, goods in process and finished goods all
represent various forms of inventory. Each type represents
money tied up until the inventory leaves the company as
purchased products.
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