When recording inventory in the financial statements, the accounting standards prescribe that the companies use the lower of cost or net realisable value.

Question

Quizplus · Accepted Answer

This statement is true. The lower of cost or net realisable value (NRV) is used to ensure that inventory is stated at its lowest possible value in the financial statements. Cost refers to the cost to acquire or produce the inventory, while NRV refers to the estimated selling price less any costs to complete the inventory and sell it. If NRV is less than cost, then the inventory should be written down to NRV.

When Recording Inventory in the Financial Statements, the Accounting Standards