There may be a variety of causes for such a write down. The account contains an estimated charge for inventory that has not been specifically identified, but which the accountant expects to write down the value at which it is currently recorded. Rather, it is calculated using a lump sum at. She writes online courses for professionals seeking CPE hours and has also published the book "Guide to Non-profits: From the Trenches." Her articles have been published in national magazines such as the "Journal of Accountancy," "Architecture Business and Economics" and "Veterinary Economics." Shanker holds a Master of Business Administration. An inventory reserve is an asset contra account that is used to write down the value of inventory. COGS Accounting: There are no continual entries under the COGS account associated with periodic inventory systems. You could then record this on an income statement and use it to calculate a company's gross profits. The cost of goods sold (COGS) includes the expenses and effort that went into selling inventory during a selected amount of time. Sheila Shanker is a certified public accountant based in California. Calculating inventory adjustments can also help calculate gross profits. "Accounting Standards Codification: 330 Inventory 10 Overall S99 SEC Materials." Accessed Sept. "Statement of Financial Accounting Concepts No. The value of the inventory is in its potential sale. Accounting Study Guide: Accounting for Inventories You are buying/creating an asset, so it should be shown on your balance sheet as such in an inventory asset account.
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