Adjusting Lower Cost Of Market Inventory On Valuation

1466 Words Aug 15th, 2014 6 Pages
Adjusting lower cost of market inventory on valuation
Inventory valuation is a financial method which assist the companies in providing monetary value to the products which make up the inventory of the company. The most important asset of the companies are their inventories. The measurement of the value of the inventory is essential to make correct financial statements. In case the measurement of the inventory is not proper, the revenues will not match properly with expenses, this will affect the busienss decisions of the company.
The companies which report their inventory under the market rule of lower cost, commonly use contra asset inventory account. The companies use balance sheet in order to report that the market amount of the inventory is less than the cost amount of inventory. It can be said in the other sense that the accumulation of the inventory account balance and allowance account balance will equate the lower of cost method (Lower of Cost or Market, 2008).
Inventory Valuation Method-
The inventory valuation methods are generally used according to the principles of accounting and practices. These methods are not same for all the business organizations. For the purpose of tax calculations, the inventory valuation rules should not contravene with the consistent capitalization rules. The inventory valuation method used by the business organization should reflect their income clearly and must be used by them every year.
Lower of Market Cost-
This mehtod is used…

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