How to Record LCM Inventory Adjustment
Adjusting the carrying value of inventory when its market value falls below the historical cost.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Cost of Goods Sold | Expense | 1,200.00 | - |
| Inventory | Asset | - | 1,200.00 |
💡 Accountant's Note
In accordance with the conservatism principle, inventory must be reported at the Lower of Cost or Market (LCM). This entry reduces the inventory asset to its net realizable value.
Practitioner & Systems Framework
💻 ERP Architecture
Utilize inventory revaluation modules to automate the price comparison process.
⚠️ Audit Flags
Large one-time write-downs at the end of a fiscal quarter.
📄 Required Documentation
Market price quotes or recent sales data justifying the valuation drop.
Automate this entry with the JEH Accounting Suite
Stop doing manual entry. Our VBA-powered ERP automatically generates your ledgers, Trial Balance, and Financial Statements.
No Subscriptions. Own your data.
Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.
Related Journal Entries
Discussion & Community Questions
Loading comments...