Inventory Write-Down (Lower of Cost or NRV)
Adjusting the carrying value of baled recyclable commodities (e.g., Cardboard/OCC) when global market prices drop below the cost of processing.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Cost of Goods Sold - Inventory Write-down | Expense (+) | 12,000.00 | - |
| Inventory - Recyclable Commodities | Asset (-) | - | 12,000.00 |
💡 Accountant's Note
Recyclable commodities (Paper, Plastics, Aluminum) are volatile. Under ASC 330, inventory must be carried at the Lower of Cost or Net Realizable Value (NRV). If the 'Yellow Sheet' (industry price index) for Old Corrugated Containers (OCC) crashes, the MRF must write down the value of the bales sitting in the yard to the current market price minus disposal/shipping costs.
Practitioner & Systems Framework
💻 ERP Architecture
The inventory sub-ledger should be updated monthly based on the latest commodity index prices. High-volume MRFs use 'Weighted Average Cost' to track sorting/baling labor and electricity applied to each ton.
⚠️ Audit Flags
Obsolescence/Slow-moving inventory. If bales are sitting in the yard for >60 days during a market downturn, auditors will insist on a significant NRV write-down.
📄 Required Documentation
Inventory count sheets (bale counts), commodity price index (e.g., RISI or Fastmarkets), and the NRV calculation spreadsheet.
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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.
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