Plz reply - Inventory value

Inventory Dr

                      To          Provisions

This entry was passed by the company at the time of making the provision for incentive that may be payable to the party for meeting certain standards

But the standards were not meet and the company wants to reverse the provisions. But the inventory will go negative if the provisions are reversed.

What should the company do??????????????????

Replies (15)

can u tell me, what kind of standards company wants to meet ?

 

Can you explain the scenario in detail. Cc you said the standards are not met, it means whether you may 've to return the Inventory back?

If the provision amount is only with respect to the contingent payment then it can ve.well e reversed.

Kindly explain the case in full??

i dont think that the inventory value can be increased by creating a provision against it. It appears to be a contingent liabilty n creationof provision does not appear to be suitable enough.

Instead of having created a provision entry as

Inventory A/c Dr

     To Provision A/c

you could 've created a provision entry like this

Party A/c Dr

      To Provision A/c.

So that Subsequent Provision reversal when standards are not met will not affect the inventory value.

If you agree with this you will have to pass three entries subjecting to the amount of contingent payment.

1st: Provision A/c Dr

           To Inventory A/c

        (to the extent of such amount)

 

2nd: Party A/c Dr

             To Provision A/c

         (Rectification of wrong entry previously passed)

 

3rd: Provision A/c Dr

             To Party A/c

        (Now reversal of 2nd entry since standards are not met)

Provide a transfer entry...

Provsion (old) Dr.

to Incentives ( new a/c opened )

this will keep the velue of inventory intact :)

 

i think provision is an error

if it is error then it is a PRIOR PERIOD ITEM.

Provisions a/c

         To Inventory ( upto the value of inventory

          To Gain on Provisions ( transfered to P & l a/c)

yes i agree with aparna

AGREE WITH APARNA

Can anyone tell me is PF Act applicable to wholesale traders dealing in Stationery Products,Computer dealers(like in nehru place),...can any one explain this to me

Originally posted by : Prateek

Can anyone tell me is PF Act applicable to wholesale traders dealing in Stationery Products,Computer dealers(like in nehru place),...can any one explain this to me

twenty or more persons employed on any previous day will make the establishment liable to cover and pay under Provident fund.

Originally posted by : Prateek

Can anyone tell me is PF Act applicable to wholesale traders dealing in Stationery Products,Computer dealers(like in nehru place),...can any one explain this to me

if such dealers are depositing the pf dues for their employees the such act also applies otherwise not

inventory      dr

to provision a/c

is insane, how can u increase ur inventory value for a contingency,  if it was a clause provided in the invoice/sale document, and its occurence was more likely than not, they should have raised a provision debiting the p&l a/c or the related exp as an o/s exp, if  they start raising inventory values for contingencies, profits may be inflated/ deflated and it ll be hard to find a loss making unit .

agree with Arpana

hi aLL and i appreciate understanding of mudassar.....provision is always made from p/l ....

now i assume that you can't change the entry pass earlier for making the provision from inventory....

now u immediately pass an entry 

1)
Provision a/c dr

To suspense a/c

 

and wen u got the sufficient balance in inventory a/c..then 

2)

Suspense a/c dr 

to Inventory...

because we also need to corrct the inventory a/c......so that it shows the real physical inventory stock with u....

pls write if u had any confusion....

 

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
Featured 03 October 2026
Accountant

A P Lodha and Associates

Jalna

B.Com

View Details
Company
12 October 2026
Chartered Accountant - Internal Audit

HKC | Chartered Accountants & Business Advisors

Ludhiana

CA

View Details
Company
08 October 2026
SALES TELECALLER

HIRE NOVA

Lucknow

Graduate (Any)

View Details
Company
ARTICLESHIP 07 October 2026
Article assistant

S.K.Bajpai & Co.

Noida

B.Com

View Details
Company
Featured 27 October 2026
semi-qualified CA

Saini Pati Shah & Co LLP, Chartered Accountants

Mumbai

CA Final

View Details
Company
12 October 2026
Finance

I-Genext Consulting Private Limited

New Delhi

CA

View Details
Company
30 September 2026
Senior Accounts Executive

Codeboard Technology

Chennai

MBA

View Details
Company
24 October 2026
CA Industrial Trainee

Fytomax Nutrition Private Limited

Aurangabad

CA Inter

View Details