Accounting for IGCSE & O level - Final Statements (Section 10 - No. 4)
Which of the following is true regarding the valuation of inventory at the lower of cost or net realisable value (NRV)?
NRV must be lower than the cost to be recognised
Cost must be lower than the NRV to be recognised
The value reported on the balance sheet is the lower of these two values.
Only the cost will ever be used to value the inventory.
Explanation
The inventory value on the statement of financial position must be the lower of the inventory cost and NRV.
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