Sun Ltd. has fabricated special equipment (solar power panel) during 2024-2025 as per drawing and design supplied by the customer. However, due to a…

From the fact given in the question it is obvious that Sun Ltd. is a manufacturer of solar power panel. As per AS 2 ‘Inventories', inventories are assets (a) held for sale in the ordinary course of business; (b) in the process of production for such sale; or (c) in the form of materials or supplies to be consumed in the production process or in the rendering of services. Therefore, solar power panel held in its stock will be considered as its inventory. Further, as per the standard, inventory at the end of the year are to be valued at lower of cost or NRV. As the customer has postponed the delivery schedule due to liquidity crunch, the entire cost incurred for solar power panel which were to be supplied has been shown in Inventory. The solar power panel are in the possession of the Company which can be sold in the market. Hence company should value such inventory as per principles laid down in AS 2 i.e. lower of Cost or NRV. Though, the goods were produced as per specifications of buyer the Company should determine the NRV of these goods in the market and value the goods accordingly. Change in value of such solar power panel should be provided for in the books. In the absence of the NRV of WIP and Finished product given in the question, assuming that cost is lower, the company shall value its inventory as per AS 2 for ₹140 lakh [i.e solar power panel (WIP) ₹85 lakh + solar power panel (finished products) ₹55 lakh]. Alternatively, if it is assumed that there is no buyer for such fabricated solar power panel, then the NRV will be Nil. In such a case, full value of finished goods and WIP will be provided for in the books. As regards Sundry Debtors balance, since the Company has filed a petition for winding up against the customer in 2025-2026, it is probable that amount is not recoverable from the party. Hence, the provision for doubtful debts for ₹65 lakh shall be made in the books against the debtor's amount.