CURRENT AFFAIRS

Detailed explanation-1: -Inventories should always be valued at cost or net realisable value, whichever is lower. In cases where the inventory is damaged, obsolete, or overvalued as compared to the market, an entity has to write down the inventory to net realisable value.

Detailed explanation-2: -Following are the steps for valuation of inventories: A. Determine the cost of inventories B. Determine the net realizable value of inventories C. On Comparison between the cost and net realizable value, the lower of the two is considered as the value of inventory.

Detailed explanation-3: -Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

Detailed explanation-4: -The value of a good can shift over time. This holds significance, because if the price at which the inventory can be sold falls below the net realizable value of the item, thus triggering a loss for the company, then the lower of cost or market method can be employed to record the loss.

Detailed explanation-5: -The cost of inventory includes the cost of purchased merchandise, less discounts that are taken, plus any duties and transportation costs paid by the purchaser.