I want to show inventory write down in my p/l statement . I am a readymade garments proprietor . Purpose of my inventory write down is because the resale value of such stock is decreases year by year. Can anyone help me how to calculate fair value of my stock and how to show the write down in my official balance sheet ?
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Inventory write down
Replies (5)
Fair value is the value you expect to receive when you sell the inventory. Being in the business you must be knowing it yourself.
I know what is fair value , basically i am asking how to write down my inventory , what method and will it be accepted by the income tax department ?
As per AS-2 Inventory is valued at Cost OR Net Realizable Value whichever is less.
Dr. Profit and Loss Account
Cr. Inventory
With the amount you want to write off.
How to calculate NRV ? , my business is readymade garments shop
NRV = Fair Value - Selling Costs, So you can derive the value of your stock as per the running rates of the market and then estimate the cost still you need to bear for your sale and the net amount shall be the NRV. Hence the difference between your NRV and cost shall be written off to P & L.
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