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hello Sir,
plz explain
Holding gains on inventory are included in profile. During a period of high inflation the monetary
value of inventories held may increase significantly while they are being processed. The
conventions of historical cost accounting lead to the realised part of Ihis holding gain (known as
inventory appreciation) being included in profit for the year.Because throughout the period of processing the adjusted costs are recognized as increasing so the inventory value increases and as closing inventory increases, the cost of sales decreases thus improving the gross profit
It’s all very hypothetical and deep in the minds of theorists. It’s based on indexes and averages and, basically, sucks
And thankfully it’s a rare visitor to the world of P2 examinations 🙂
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