In short
Applies to: Manufacturing and trading business owners and accounts teams
- Compare quotations using the relevant purchase cost divided by the quantity expected to be usable.
- Consider discounts, freight and applicable non-recoverable taxes. Keep recoverable taxes separate and investigate abnormal losses. A lower quoted unit price does not necessarily produce a lower usable-unit cost.
Two vendors offer the same material at different prices. The first looks cheaper until freight, pack sizes, inspection and usable quantity are considered. For a textile processor, engineering workshop or trading business, a consistent purchase comparison is often more useful than negotiating one price line in isolation.
Put both quotations on the same basis
Record the material specification, quantity, unit of measurement, delivery location and commercial terms. A kilogram, a roll and a finished usable piece are not interchangeable measures. If quotations use different units, document the conversion and check it against the specification.
Separate purchase cost from payment amount
AS 2 includes directly attributable purchase costs and deducts trade discounts and rebates; taxes subsequently recoverable are excluded. Whether a particular GST amount is recoverable requires a separate eligibility review. Do not assume that every tax shown on an invoice is either a cost or an available credit.
The accompanying calculator therefore asks for the supplier amount before separately identified recoverable taxes, a confirmed discount, freight, reviewed non-recoverable taxes, other directly attributable acquisition costs and usable quantity. It does not decide tax eligibility or replace the entity’s applicable accounting framework.
A worked purchase comparison
Supplier A charges ₹1,00,000 for 1,000 usable units. A confirmed discount of ₹2,000, freight of ₹4,000 and directly attributable inspection of ₹1,000 give a comparison cost of ₹1,03,000, or ₹103 per unit. Supplier B quotes ₹101 per unit delivered for the same 1,000 usable units, with no other acquisition costs in this illustration. Supplier B is lower by ₹2 per usable unit, although A’s starting price was ₹100. All amounts here use the same tax basis.
Check the unusual items separately
Do not quietly spread abnormal losses or penalties across the accepted quantity. Investigate and classify them. AS 2 excludes abnormal waste and selling costs from inventory cost. Entities applying Ind AS must follow their applicable framework instead.
Keep a quotation comparison sheet with the purchase order. At receipt, compare ordered, received, rejected and accepted quantities. At invoice approval, verify the freight agreement and discount actually available. If the inputs change, update the comparison before treating the original result as a permanent standard cost.
தமிழ் சுருக்கம்
விலைப்புள்ளியில் (Quotation) உள்ள அடிப்படை அலகு விலை (Unit Price) மட்டும் போதாது. தள்ளுபடி, சரக்குப் போக்குவரத்துச் செலவு, பொருந்தும் மீட்க முடியாத வரிகள் மற்றும் பயன்படுத்தக்கூடிய அளவைச் சேர்த்து ஒப்பிடுங்கள்.
Practical next step
Download the working record — CSV and record the assumptions and follow-up actions.
Sources
This article is for general information only and does not constitute professional advice. Please consult a qualified professional before acting on it.
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