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The provisions of IAS 2: Inventories – ACCA Financial Accounting (FA) lectures

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  1. Dear Sir,

    Thanks for the Knowledge sharing.

    Why we included factory rent in to the material cost ?.
    normally factory rent paying for all areas including admin office/utility building and etc.
    Thanks.

    • The factory is where the goods are actually produced and we should include all costs of production.

      Certainly the factory and the offices etc. may well be in the same building and if that is the case then we need to split (i.e. apportion) the rent between the different areas and only the amount for the factory part is charged as a production cost.

  2. Thank you so much for this wonderful and explicit lectures, i have gained a lot to take to me to the next step in FR7 as revision to FR7 hoping to enroll in December 2022 exams. A revision excercise before starting FR7. God bless you for taking your time.

  5. Hello. Thx for nice and understanding lectures. I woul like ask the following question:
    Does the cost of purchases include VAT ? IAS 2 states that cost of purchaes must include import duties and othe taxes. And if VAT is included, then how would it effect on COGS as we now that sales does not include VAT. Thx in adnvance

    • The cost of purchases only includes sales tax if the business is not registered for sales tax. If they are registered then the sales tax is recovered from the state and is not part of the cost of purchases. (Do watch the lectures on sales tax for an explanation.)

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