## Valuation of Material Receipts
Valuation of material receipts means ascertaining the cost of materials purchased.
### Rule of Thumb
- Add items that are necessary costs to bring material to its present location and condition.
- Deduct items that reduce the purchase price.
- Exclude penalties/fines and financing costs.
### Treatment Table
| Category | Item | Treatment |
|---|---|---|
| Discounts & Subsidies | Trade Discount | Deduct from purchase price |
| Quantity Discount | Deduct from purchase price | |
| Cash Discount | Do NOT deduct (treated as interest/finance income) | |
| Subsidy / Grant / Incentive | Deduct from purchase price | |
| Duties & Taxes | Road Tax / Toll Tax | Add to purchase cost |
| Octroi / Entry Tax | Add (if borne by buyer) | |
| GST | Add (if input credit is NOT available) | |
| Purchase Tax | Do NOT add (if credit is available) | |
| Penalties & Charges | Demurrage | Do NOT add (it is a penalty) |
| Detention Charges / Fine | Do NOT add (penalty) | |
| Penalty | Do NOT add (penalty) | |
| Other Expenditures | Insurance Charges | Add |
| Commission / Brokerage Paid | Add | |
| Freight Inwards | Add | |
| Cost of Containers (non-returnable) | Add | |
| Cost of Containers (returnable) | Do NOT add | |
| Shortage (normal reasons) | Absorbed into cost of good units | |
| Shortage (abnormal reasons) | Charged as loss to P&L A/c |