PRC-1 · Chapter 10 · Question 75 of 100
An entity records a write-down of inventory from its cost of Rs. 240,000 to its Net Realizable Value of Rs. 234,000. What is the adjusting entry?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Debit Cost of Sales Rs. 6,000, Credit Inventory Rs. 6,000
Explanation
The inventory value has fallen by Rs. 6,000. This loss must be recognized by crediting (reducing) Inventory and debiting an expense, usually Cost of Sales.
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