At What Point of the Production Phase of an Extractive

question 20

Multiple Choice

At what point of the production phase of an extractive operation should inventories be recognised?

• A) Inventories may be brought to account at the earliest stage at which their value and quantity may be reliably measured or estimated.
• B) Inventories should be brought to account at the earliest stage at which materials representing, or expected to be converted by further processing to, saleable product can be measured with reliability and the quantities of such materials can be determined by physical measurement or reliable estimate.
• C) Inventories should be brought to account at the point that their recovery from the ground is considered to be virtually certain and the extent of the reserves can be measured reliably.
• D) Inventories should be brought to account only at the latest stage at which materials representing saleable product can be measured with reliability in terms of their recoverable value and cost.
• E) None of the given answers.

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Definitions:

Debit Side

The left side of a ledger account that records increases in assets and expenses or decreases in liabilities and equity.

Debits

These are entries on the left side of accounting records, used to increase asset or expense accounts or decrease liabilities, equity, or revenue accounts.

Credits

Accounting entries that increase liabilities or equity or decrease an asset or expense.