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Author:
Harold Averkamp, CPA, MBA

allowance to reduce inventory to net realizable value definition

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.

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About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

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