question_answer

XYZ Ltd. is in the process of preparing its balance sheet as per Schedule III, Part I of the Companies Act, 2013 and provides its true and fair view of the financial position.

(i) Under what head and sub-head will the company show stores and spares and loose tools in its balance sheet?

(ii) What is the accounting treatment of stores and spares and loose tools, when the company will calculate its inventory turnover ratio?

(iii) What is the objective of this analysis?

(iv) Identify the value being followed by XYZ Ltd.

Answer:

            (i) Head Current Assets; Sub-head Inventories (ii) While calculating inventory turnover ratio, these are not included in inventories. (iii) Objectives of such analysis are: (a) Assessing the ability of the enterprise to meet its short-term and long-term commitments. (b) Assessing the earning capacity of the enterprise. (iv) Values followed by XYZ Ltd are transparency, honesty and abiding by law.