![]() Thus, the balance sheet and the accounting equation will show a reduction in inventory and in owner's or stockholders' equity. Since the amount of the write-down of inventory reduces net income, it will also reduce the amount reported on the balance sheet for owner's equity or stockholders' equity. If the amount of the Loss on Write-Down of Inventory is significant, it should be reported as a separate line on the income statement. If the amount of the Loss on Write-Down of Inventory is relatively small, it can be reported on the income statement as part of the cost of goods sold. Under FIFO and average cost methods, if the net realizable value is less than the inventory's cost, the balance sheet must report the lower amount. A writedown is a reduction in the stated value of a business asset to reflect its current market value. Example of Reporting a Write-down in Inventory is only when the bank actually removes all or part of this bad debt from its balance sheet that the loan is deemed a write-off. Its also - a writedown is the reduction in the value of your assets. 'I want to lose 20 pounds of fat,' is hugely different than, 'I want to lose 20 pounds of fat in the next four months.' The second is specific and gives you. The debit in the entry to write down inventory is recorded in an account such as Loss on Write-Down of Inventory, which is an income statement account. Often the balance in the current asset account Inventory is reduced through a credit to a contra inventory account, which is referred to as a valuation account. Under FIFO and average cost methods, when the net realizable value of inventory is less than the cost of the inventory, there needs to be a reduction in the inventory amount. ![]() How do you report a write-down in inventory? Definition of Write-down in Inventory
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