Hi tutor,
I understand if NRV is 0, the double entry wiil be:
DR Expenses
CR Assets
If lets say, the NRV is more e,g $14,000. The cost is $13,000. Then how to account the difference. What will be the double entries?
Thank you :)
Ask the Tutor ACCA AAA
IAS 2 Inventories Osier Qn 44 BBp
3y ago#1Short answer - there isn't one
Suppose y/e inventory is $100k before management carries out an NRV review - so for the draft financial statements, the double entry is:
Dr Closing inventory (asset) $100k
Cr Closing inventory (P/L) $100k
Then NRV exercise shows that the NRV of some product/line items is $2k less than cost, so journal adjustment is:
Dr Closing inventory (P/L) $2k
Cr Closing inventory (asset) $2k
If NRV is > cost there is no adjustment - inventory is already stated at the lower amount. You can "revalue" inventory upwards in anticipation of a future sale - you have to wait until you sell it (when you recognise revenue).
Sign in to reply to this topic.