allowance to reduce inventory to net realizable value

This is a valuation account for the asset Inventory. A credit balance should be reported in this account for the amount that the net realizable value of inventory is less than the cost reported in the Inventory account. The credit entered into the Allowance for Reduction of Cost to Net Realizable Value will mean a debit is entered into the income statement account Loss from Reducing Inventory to Net Relizeable Value.