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Hello guys, hope you are ok.
what is the double entry when there is reversal in write-down in value of inventory?There is no entry (and it won’t happen in the exam anyway!).
Inventory is always valued at the lower of cost and net realisable value – so when we come to enter the value at the end of the period we apply the rule. Just as there is no entry for writing down the value, there is no entry for reversing it.
You should watch the free lectures on inventory.
I thought, if you write down inventory from it cost to NRV at first, but later you find out that it’s NRV is now more than the cost, you should reverse the write down so that you record it at it’s cost. what do you think?
At the end of the period, you value at the lower of cost or net realisable value, based on the information you have available. And then you enter the value you have decided on. (You don’t enter one figure and then change it).
So there is no need to change it later.
At the end of the next period, (if the inventory is still there) then you will apply the same rule again and enter the correct figure (regardless of whether it is more or less than the value you used before). There is no need for any extra entries.
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