Inventory Writedown Journal Entry
22 هزار بار بازدید -
4 سال پیش
-
When a company has decided
When a company has decided that an inventory writedown is necessary, the company can use one of two methods to record the journal entry.
The first method is to debit Cost of Goods Sold and credit the Inventory account. The second method is to debt a loss account (Loss on Decline in Value of Inventory) and credit the Inventory account.
The second method is more informative for investors because they can clearly see the amount of the writedown on the Income Statement. The first method, on the other hand, simply buries the writedown in Cost of Goods Sold.
Regardless of which approach is used, the company may also choose to credit an allowance account (Allowance to Reduce the Value of Inventory) instead of crediting the Inventory account. The allowance account would then act as a contra account, being subtracted from inventory on the Balance Sheet to obtain the net inventory balance.
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The first method is to debit Cost of Goods Sold and credit the Inventory account. The second method is to debt a loss account (Loss on Decline in Value of Inventory) and credit the Inventory account.
The second method is more informative for investors because they can clearly see the amount of the writedown on the Income Statement. The first method, on the other hand, simply buries the writedown in Cost of Goods Sold.
Regardless of which approach is used, the company may also choose to credit an allowance account (Allowance to Reduce the Value of Inventory) instead of crediting the Inventory account. The allowance account would then act as a contra account, being subtracted from inventory on the Balance Sheet to obtain the net inventory balance.
—
Edspira is the creation of Michael McLaughlin, an award-winning professor who went from teenage homelessness to a PhD. Edspira’s mission is to make a high-quality business education accessible to all people.
—
SUBSCRIBE FOR A FREE 53-PAGE GUIDE TO THE FINANCIAL STATEMENTS, PLUS:
• A 23-PAGE GUIDE TO MANAGERIAL ACCOUNTING
• A 44-PAGE GUIDE TO U.S. TAXATION
• A 75-PAGE GUIDE TO FINANCIAL STATEMENT ANALYSIS
• MANY MORE FREE PDF GUIDES
* http://eepurl.com/dIaa5z
—
GET CERTIFIED IN FINANCIAL STATEMENT ANALYSIS, IFRS 16, AND ASSET-LIABILITY MANAGEMENT
* https://edspira.thinkific.com
—
LISTEN TO THE SCHEME PODCAST
* Apple Podcasts: https://podcasts.apple.com/us/podcast...
* Spotify: https://open.spotify.com/show/4WaNTqV...
* Website: https://www.edspira.com/podcast-2/
—
GET TAX TIPS ON TIKTOK
* TikTok: prof_mclaughlin
—
ACCESS INDEX OF VIDEOS
* https://www.edspira.com/index
—
CONNECT WITH EDSPIRA
* Facebook: Facebook: Edspira
* Instagram: Instagram: edspiradotcom
* LinkedIn: LinkedIn: edspira
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CONNECT WITH MICHAEL
* Twitter: Twitter: Prof_McLaughlin
* LinkedIn: LinkedIn: prof-michael-mclaughlin
—
ABOUT EDSPIRA AND ITS CREATOR
* https://www.edspira.com/about/
4 سال پیش
در تاریخ 1399/05/28 منتشر شده
است.
22,051
بـار بازدید شده