The account structure of the provision for decline in value of inventory, and how to calculate the p

The account structure of the provision for inventory decline is as follows: increase in credit and decrease in debit. Example:

1. On the balance sheet date, if the inventory is impaired, the "asset impairment loss" account shall be debited and the "inventory decline provision" account shall be credited according to the difference between the net realizable value of the inventory and the cost.

2. If the value of the inventory for which the provision for decline in value has been made is later recovered, the account of "provision for decline in value of inventory" shall be debited and the account of "asset impairment loss" shall be credited according to the amount of the increase in the amount of the provision for decline in value of inventories that has been originally accrued.

Inventory refers to the finished products or commodities held by the enterprise in its daily activities, the products in the production process, and the materials and materials used in the production process or the provision of labor services. Inventory can only be confirmed if it meets the following conditions at the same time:

1) The economic benefits associated with the inventory are likely to flow into the enterprise.

2) The cost of the inventory can be reliably measured.

Each account is divided into debits and credits, with the left side of the account being the debit side and the right side of the account being the credit side.

1) Asset class (excluding negative equity accounts such as "accumulated depreciation", "bad debt provision" and "inventory depreciation provision").

In asset class accounts, the debit is increased, the credit is decreased, and the balance is generally debited.

Closing Balance of Asset Class Account = Opening Balance Debit Occurrence in the Current Period - Credit Occurrence in the Current Period.

Equity accounts such as liabilities and owner's equity accounts are credited more and debited, and the balance is generally credited. This is also the case for negative asset accounts such as "provision for bad debts", "accumulated depreciation", "provision for decline in value of inventory", and "provision for impairment of fixed assets" in asset classes.

Closing Credit Balance = Opening Credit Balance + Current Credit Amount - Current Debit Amount.

Income account: Similar to the equity account, the credit is increased and the debit is decreased. However, the income account should be carried forward at the end of each period, and the entire amount incurred will be transferred to the "profit of the current year", so there is no balance after the end of the period.

Expense (cost) accounts: The same structure as the asset account, as opposed to the income account, the debit is increased and the credit is decreased. The usual balance should be on the debit side of the account, and there is generally no balance in the account after the closing balance is carried forward, and if there is a balance, the closing balance is on the debit side.

The calculation method of the allowance for inventory decline is as follows:

Provision for inventory decline = quantity of inventory (unit cost price - market price excluding tax).

Content expansion: If the calculation result is positive, it means that the realizable value of the inventory is lower than the cost price, and there is a loss, so the provision for inventory decline will be made according to this number, and if it is negative, there is no need to make a provision.

1.The first provision for price decline:

Borrow: Asset impairment loss - inventory impairment loss (cost - net realizable value).

Credit: Provision for Decline in Value of Inventories--- x Commodities (Cost - Net Realizable Value).

2.The nth provision for price decline: (i.e., the book value must be adjusted to the value under the current **market value each time).

Debit: Asset impairment loss (the difference between the net realizable value and the cost - the original balance of the "Inventory Impairment Provision" account).

Credit: Provision for Decline in Value of Inventories--- x Commodities (the difference between the net realizable value and the cost - the original balance of the "Provision for Decline in Inventories" account).

3.Reversal of the downside read:

Debit: Provision for Decline in Value of Inventories--- Commodity A (the difference between the original balance of the "Provision for Decline in Inventories" account and the net realizable value below cost).

Credit: Asset impairment loss (the difference between the original balance of the "Provision for Inventory Impairment" account and the net realizable value below the cost).

Provision for inventory decline refers to the part of the inventory cost that cannot be recovered due to the damage of the inventory, the obsolescence of all or part of the inventory, or the fact that the sales** are lower than the cost at the end of the interim period or the end of the year, etc., shall be withdrawn according to the difference between the cost of a single inventory item and its net realizable value, and shall be included in the inventory decline loss.

The amount of the provision for inventory decline in value accrued in the current period = the due balance of the provision for inventory decline at the end of the period - the balance due due to the provision for inventory decline at the beginning of the period - the amount of the provision for inventory decline carried forward in the current period.

The Inventory Decline Allowance Account is used to account for the inventory decline provision withdrawn by the enterprise. Provision for inventory refers to the accounting item used to offset the carrying amount of inventory at the end of the accounting period when the cost of inventory is higher than its net realizable value, according to the difference between the cost and the net realizable value. Simply put, it is a prudent treatment of the reduced portion because the net realizable value of the inventory is lower than the original cost.

Provision for decline in value of inventories at the end of the period.

The account can have a balance.

First of all, the meaning of the provision for inventory decline is clarified, and the net realizable value of inventory is lower than the cost of inventory, indicating that inventory has fallen in value. If the value rises above cost, then the provision for inventory decline will be reversed in full and cleared. If the inventory has been depreciated after the provision for depreciation** has been withdrawn, it is necessary to convert the allowance for depreciation of inventory into profit or loss for the current period.

For example, the cost is 1,000 yuan, and the net realizable value is only 800 yuan, that is, the price drops by 200 yuan. Then the inventory decline reserve account should have a credit balance of 200 yuan at this time.

The first case: after that, the net realizable value of the deposit and loan rises to 900 yuan, and the inventory decline can be reversed back to 100 yuan. After that, the net realizable value of the inventory rises to 1,000 yuan, and the inventory needs to be cleared to zero.

The second situation: if the enterprise will withdraw all the inventory after the 200 yuan inventory decline is withdrawn, then it is necessary to transfer all the 200 yuan inventory price decline provision to the current profit and loss.

Extended Materials. Valuation method.

1. Cost method.

It refers to the actual purchase cost of the inventory at the end of the period, the rubber trace or the manufacturing cost.

Presented on the balance sheet. The advantage of this method is that it is simple and easy to implement, and it guarantees the reliability of accounting information: the disadvantage is that when the market value of inventory is **, it will lead to an inflated asset, which is not in line with the principle of accounting prudence.

2. The market price method refers to the listing on the balance sheet according to the market ** of the inventory at the end of the period. The advantage of this method is that it can reflect the actual value of the inventory, which helps to improve the usefulness of accounting information; The disadvantage is that the workload of collecting market price data is too large, which is not convenient for actual operation, and when the market price of inventory increases, it will also lead to an inflated profit in the current period.

3. The lower of cost and market price method refers to the comparison of the cost and market price of inventory at the end of the accounting period, and the lower of the two is taken as the basis for inventory valuation, that is, when the inventory cost is lower than the market price, it is valued at cost; When the market price is lower than the cost, the price is denominated at the market price. The cost here refers to the actual cost of the inventory at the time of purchase or production, that is, the book value of the inventory.

The market price compared to the cost is not a market sale in the general sense**, it has different regulations in different countries, and the replacement cost is generally used.

and net realizable value. Among them, replacement cost refers to the total expenses payable for the repurchase of the same inventory under existing conditions, and net realizable value refers to the estimated selling price of the inventory minus the estimated cost to be incurred at the time of completion in the daily production and operation activities of the enterprise.

and the amount after the relevant taxes. China's "Accounting Standards for Business Enterprises No. 1 - Inventory" stipulates that on the balance sheet date.

Inventories should be valued at the lower of cost and net realizable value.

There is no provision for the decline in the value of inventories, and it should be said that the provision for decline in the value of inventories is an insurance difference in the value of inventories, and it is a current asset, not an inventory.

The Inventory Decline Allowance Account is used to account for the inventory decline provision withdrawn by the enterprise. It means that at the end of the interim period or at the end of the year, if the inventory is damaged, all or part of the inventory is obsolete or the sales** are below the cost, etc., the part of the inventory cost that cannot be recovered shall be withdrawn according to the difference between the cost of a single inventory item and its net realizable value, and included in the inventory decline loss.

The credit side of the allowance for inventory decline indicates a decrease in the value of the asset, and the debit side indicates that the impairment of the asset has recovered It belongs to the asset class account. When the net realizable value of inventory is lower than its cost, the difference is the accrued provision for inventory decline. The credit balance of the allowance for decline in value of inventories reflects the amount by which the net realizable value of inventories is lower than their cost.

It should not be included, it is just a preparation and is not included in the inventory. The provision for inventory decline is the same as the asset impairment loss - inventory decline provision.

together, included in profit or loss.

Provision for decline in value of inventory: At the balance sheet date, inventory should be measured at the lower of cost and net realizable value. If the cost of inventory is higher than its net realizable value, a provision shall be made for the decline in the value of inventory.

Net realizable value is determined on the basis of the estimated selling price minus the cost of further processing and taxes on sales. If the inventory does not require processing and direct sale, the net realizable value is determined by subtracting taxes on the sale from the estimated selling price. If the cost is higher than the net realizable value, the impairment is accrued:

The Asset Impairment Loss - Provision for Inventory Decline in Value account is debited and the Provision for Inventory Decline in Value account is credited. If the net realizable value of inventories recovers, the original provision should be reversed, but the amount of the reversal should be limited to the original provision for price decline.

The reversal of the provision for inventory decline means that if the influencing factors of the previous write-down of the value of the inventory have disappeared, the amount of the write-down shall be restored and reversed within the amount of the original provision for the decline in the value of inventory, and the amount reversed shall be included in the profit or loss for the current period.

Accounting entries carried forward for inventory decline provision: debit: inventory decline provision; Credit:

cost of principal business; At the time of carryover, it needs to be calculated according to the proportion. For inventories transferred due to debt restructuring and non-monetary asset exchanges, the provision for inventory decline that has been made should also be carried forward. If the provision for inventory decline is made according to the inventory category, the corresponding inventory decline provision shall be carried forward according to the proportion of the cost of the inventory transferred out of the inventory in the event of sales, debt restructuring, non-monetary asset exchange, etc., to the cost of the inventory of the category before the inventory is transferred out.

Supplementary information: The provision for inventory decline refers to the part of the inventory cost that cannot be recovered due to the damage of the inventory, the obsolescence of all or part of the inventory, or the sale** below the cost at the end of the interim period or at the end of the year, which is withdrawn according to the difference between the cost of a single inventory item and its net realizable value, and included in the inventory decline loss. It is an accounting treatment that is adopted when the realizable value of inventory is lower than the original cost.

Specific operation: On the balance sheet date, if the net realizable value of inventory is lower than the cost, the enterprise should make provision for inventory decline. Enterprises should generally make provision for inventory decline based on a single inventory item.

That is, at the balance sheet date, the company compares the cost of each inventory item with its net realizable value one by one, and measures the inventory at the lower level. If the net realizable value is lower than the cost, the difference between the two is the accrued provision for inventory decline. The provision for inventory decline accrued by the enterprise shall be included in the profit or loss for the current period.

For a large number of inventories with a low unit price, a provision for inventory decline can be made according to the inventory category. Inventories related to product lines produced and sold in the same region, with the same or similar end use or purpose, and difficult to measure separately from other items, may be combined to make provision for inventory decline; Inventories have the same or similar end-use or purpose, and are produced and sold in the same region, which means that the economic, legal, and market environments in which the inventories are located are the same, and have the same risks and rewards, so they can be combined to make provision for inventory decline.

The provision for inventory decline refers to the part of the inventory cost that cannot be recovered due to the damage of the inventory, the obsolescence of all or part of the inventory, or the fact that the sales are lower than the cost at the end of the interim period or the end of the year, etc., should be withdrawn according to the difference between the cost of a single inventory item and its net realizable value, and the loss of the decline in the price of the inventory shall be calculated. At the balance sheet date, when the empty cost of inventory is less than the net realizable value, the inventory is measured at cost; When the cost of inventory is higher than the net realizable value, the inventory is measured according to the net realizable value, and at the same time, the provision for inventory decline is calculated according to the difference between the cost and the net realizable value, and the profit or loss for the current period is calculated.

Whether the inventory needs to be charged for price loss depends on whether the ownership of the inventory belongs to the enterprise and whether the inventory is in a state of processing or use. All inventories whose ownership does not belong to the company do not need to be provided for inventory price loss, such as entrusted goods; All inventories in the process of processing or use do not need to be accounted for inventory price loss, such as commissioned processing materials, the physical form and quantity of products in stock are not easy to determine, and the value of low-value consumables in use is low and has been amortized into costs.

The provision for the decline in the value of the enterprise's inventory is accounted for through the account of the provision for the decline in the value of the inventory. This account can be detailed accounting by inventory item or category. The credit balance at the end of this account reflects the provision for the decline in the value of inventories that have been withdrawn but not yet resold.

On the balance sheet date, if the inventory is impaired, the asset impairment loss account shall be debited and the inventory impairment provision account shall be credited according to the difference between the net realizable value of the inventory and the cost.