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For inventory , valuation assertion ,
I saw a point
For a sample of inventory inspect purchase invoice for evidence of cost of inventory
For a sample of inventory inspect sales invoice for evidence of NRV of inventory
Why is cost used in purchases and NRV used in sales
Inventory should be values at the lower of cost and NRV.
Look at purchase invoices to get evidence about cost; look at sales invoices to get evidence about NRV.
If something cost $100 and netted only $80 when sold, its value in the FS should be $80.
I don’t get it. When I purchase something the supplier raises invoice. He will state cost or nRV which ever was less for him in the INvoice right ?
So why an I looking at cost only .
Whatever the supplier puts on the invoice is the cost to you. You have no idea what it cost the supplier or the profit the supplier makes.
You then have to value the inventory at the lower of cost to you or the net amount you could realise by selling it.
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