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General Accounting Discussions: Inventory re-valuation entry

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  1.  
    • CommentAuthorjiff0777
    • CommentTimeFeb 2nd 2009
     
    I have re-calculated the inventory and found there are some inventories which are old items and can't be sold. so, we planed to dispose those inventories. But, the disposal value of the inventoy is so high and it cannot be taken as loss only in the current year financial statement. Hence, we decided to send 1/3 of reveluation lost to the income statement and 1/2 of the loss will be deducted from coming two year financial statement. so, we planed to open an account "provision for inventory calculation loss a/c". so, i need the full double entry from inventory re-aluation to current year deduction. specially i need the entry for transfering entry to provision a/c. plz help me on this....
    • CommentAuthormfargen
    • CommentTimeFeb 10th 2009
     
    This is a good question, and I can't really find anything to support my answer in the texts or on the net. Be sure to check with a CPA or other tax advisor before doing this so you can write off the maximum amount the law allows for your loss.

    The actual bookkeeping for this would seem to be the following:

    12/31
    dr cost of goods sold 1200
    cr merchandise inventory 1200
    to record loss from obsolete merchandise disposed of that cost 1200.

    I really wanted to confirm this with an outside source, but was unable to. Possibly others on the forum will comment. Also, since I don't think this is a very common occurrence, it would be wise for you to document how you disposed of the obsolete merchandise so that you can more or less prove that it was not received by a third party in exchange for items of value. That would be seemingly a form of tax evasion or hiding income generated.
  3.  
    if you are looking for a basic understanding of inventory valuation ... see this tutorial...

    http://vitalbusinessinfo.blogspot.com/2009/10/basics-of-inventory-valuation.html

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