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Valuation of inventories


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Thanks for sharing this useful information, I will really try it out!

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MPR sanjay Kumar (CA student)     02 March 2021

MPR sanjay Kumar
CA student 
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my dear friends ,why the company valued it's inventories in Net realisable value?????what is the reason gove some examples
yasaswi gomes

yasaswi gomes (My grammar is 💯 good I)     02 March 2021

yasaswi gomes
My grammar is 💯 good I 
 198 likes  3778 points

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The company values inventory both in cost terms and NRV. Then it considers which ever is lower. Eg. if you purchased computers for 10,0000₹ and want to sell them immediately because you want to buy another one. Currently, your inventory after few days, the market selling price is down to 9,0000₹ it is a loss to you when you sell it. To record this loss, this philosophy is used to value inventory at lower of cost or NRV.  

Cos 90,000₹ - closing inventory balance @ NRV

NRV loss write off 10,000₹ Loss is debited to revenue

Inventory 1,00,000₹ - Inventory always recorded at historical cost or NRV

 

yasaswi gomes

yasaswi gomes (My grammar is 💯 good I)     02 March 2021

yasaswi gomes
My grammar is 💯 good I 
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Please note that on the balance sheet, only revalued inventory value is recorded. The above entry is just an example on how a loss is recognised. Sent a PM with examples

 

yasaswi gomes

yasaswi gomes (My grammar is 💯 good I)     02 March 2021

yasaswi gomes
My grammar is 💯 good I 
 198 likes  3778 points

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Hi sry made a mistake

usually the adjustment with cos is like

By Inventory a/c

To COS a/c

(cos reduced by closing inventory)

so

By Inventory a/c 90000

To Cos a/c 90000

By NRV loss write off a/c 10000

or simply

Cos a/c 10,000

To Inventory 10,000

note. Adj made again. I’m giving up. Some help appreciated eon entries.

 


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