The period-end measurement of inventory.
At the balance sheet date, inventories should be measured at the lower of cost and net realizable value. If the cost of inventory is higher than its net realizable value, a provision for inventory decline shall be made and included in the profit or loss for the current period. The accounting entries are:
Borrow: Asset impairment loss.
Credit: Provision for decline in value of inventories.
Among them, the cost of inventory refers to the book balance of inventory, and the net realizable value of inventory needs to distinguish the use of inventory
Inventory directly used for **, net realizable value = estimated selling price of goods (or raw materials) - estimated taxes and fees necessary for the sale of goods (or raw materials).
Raw materials used in the production of the product, net realizable value = estimated selling price of the product produced - further processing cost - estimated sales tax of the product.
If the material used to produce the product is not impaired, the material shall not be impaired, and the original book value shall be kept unchangedIf the product produced is impaired, the material should be measured at the net realizable value at the end of the period. At the same time, the above-mentioned determination of the estimated selling price amount shall be based on the contract part (except for unfairness) for the contract part and the estimated market price for the non-contract part.
If the influencing factors of the previous write-down of the value of inventories have disappeared, the amount of the write-down should be restored and reversed within the amount of the original provision for inventory decline, and the reversed amount shall be included in the profit or loss for the current period. The accounting entries are:
Borrow: Provision for decline in value of inventories.
Credit: Asset impairment loss.
When measuring inventory at the end of the period, if part of the same type of inventory is stipulated in the contract, and the other part does not have a contract, in this case, the enterprise should distinguish between the part agreed in the contract and the part that does not exist in the contract, determine the net realizable value at the end of the period respectively, and compare it with the corresponding cost, so as to determine whether it is necessary to make provision for inventory price decline.