What is inventories?

-it is assets that are held for sales in the ordinary course of business

-assets that are in the process of production for such a sale

-assets that are in the form of materials or supplies to be consumed in the production process or in the rendering of services

  

Measurement of Inventories

 

Inventories should be measured at; lower of cost and net realizable value

 

The major exception for inventories are; produces of agricultural, forest products, minerals and mineral products, commodity dealers and brokers.

 

 

Cost of Inventory include: costs of purchase, costs of conversion and other costs but do not include abnormal waste, storage cost and Administrative overheads.

 

 

Net Realizable value (NRV)

: Estimated selling price-Estimated costs of Completion-Estimated selling costs

IF NRV< Costs= Written down

 

When Inventories are sold: DR PL ( cost of sales) and CR Side ( Inventories)

Written down of Inventories:  DR PL written down cost  and CR inventories ( allowance)

Reversal of written Down : Cr inventories ( allowance) and PL written down cost

 

(what is NRV?)